Americans for Tax Reform today sent the following letter to the Senate Finance Committee leadership:

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Dear Chairman Baucus and Ranking Member Grassley:   

This week, the Senate Committee on Finance will give final consideration to a health reform bill.  It is important to note for the record that this bill violates two promises made by elected officials on the issue of taxes: first, the Taxpayer Protection Pledge made by 34 senators in which they promised to oppose income tax hikes; second, President Obama’s promise not to raise “any form” of taxes on families making less than $250,000 per year

Thirty-four senators from both parties (including eight members of the Finance Committee) have signed a Taxpayer Protection Pledge to their constituents which commits them to oppose income tax hikes.  Depending on final legislative language, there are anywhere from five to ten income tax increases in the Senate Finance plan.  Any one of these income tax hikes would be sufficient to trigger a violation of the Taxpayer Protection Pledge, since the plan is an overall net income tax increase.  For example, one provision raises the “haircut” on medical itemized deductions from 7.5 percent to 10 percent of adjusted gross income.  Another obvious pair of examples is the new $2500 cap on pre-tax flexible spending accounts (FSAs) and the new “medicine cabinet tax” which prevents FSA and health savings account (HSA) owners from using these accounts to purchase over-the-counter medicines.  Depending on how they are structured in the final legislative language, the 40 percent tax on comprehensive insurance plans and the “annual fee” on insurance, pharmaceutical and medical device firms may also be Pledge violations.

President Obama and his surrogates have gone to great pains to emphasize that he opposes “any form” of tax increase on families making less than $250,000 per year.  Even excluding the effects that indirect taxation in the Senate Finance plan will have on family budgets, there are five tax hikes which directly violate this oft-repeated promise: the individual mandate excise tax, the medicine cabinet tax on FSAs and HSAs, the $2500 cap on FSAs, the increase in the non-qualified withdrawal tax from HSAs, and the bigger “haircut” on medical itemized deductions.  It’s important to note that all of the tax hikes will ultimately be borne by working families in the form of higher prices, lower wages, and shrunken nest eggs.

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Posted by Ryan Ellis on Monday, October 12, 2009 3:20 PM EDT

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