With all the rhetoric about the healthcare law that is being challenged in court and fought about in Congress, some specifics about the plan can go fairly unnoticed. One such specific item in the law is the new restrictions on Flexible Spending Accounts (or FSAs) that began at the beginning of this year. These accounts are facilitated through an employer and they allow employees to estimate the amount of money that they would like an employer to withhold so that it can use it to buy over-the-counter drugs (among other things) before tax.
Changing these rules may not seem like it would make a very large economic impact at first glance, but the reality is that this will raises taxes on every person that currently uses an FSA to purchase OTC drugs because the money they set aside (pre-tax) to be used on OTC drugs is now taxed (this new rule does not have any exception for people making under $200,000 per year).
Another change to the FSA regulation is the new federal cap on how much can be put into the FSA account. The new cap is $2500 per year and this new rule takes effect in 2013. Currently, there is no federal cap at all. This substantially raises the taxes of anyone who puts over that amount into their FSA every year. The parents of special needs children that put money in their FSAs to pay thousands of dollars in tuition to special needs schools for their children will be hit especially hard by this substantial tax increase. Taken together, these new FSA tax hikes will result in more taxes being paid by anyone who pays for OTC drugs with their FSA and/or puts in over $2500 per year. There are thousands of individual stories about how these new changes in the law will have a very personal and devastating effect that can be read here.
More disturbing than the actual rule changes themselves has been the reaction by some on the left ever since these new rule changes were challenged. One article claims that if these changes were to be repealed that it would “deprive the government of $600 million a year in revenues. . .” This outlook assumes all that money is somehow “owed” to the government. By this logic, every time a tax deduction is used to allow an individual to keep more of their own money, it should be seen as not just taking from the government, but actually “depriving” it of the money that is owed to it.
Another critic of challengers to the new FSA tax hike seems to think that it is the responsibility of the government to forcefully take people’s money so that it can fund programs for others. Jonathan Gruber, a health economist at the Massachusetts Institute of Technology, was quoted in a Politico article as asking, “Is it really so bad to pay for insurance for our lowest-income citizens by removing a tax break for our middle- and upper-income citizens that they use to buy aspirin and glasses?”
Sure, people should and many do give money to charity to help the less fortunate. The key here is that it is a voluntary choice. America is all about freedom, not being forced to “give” money to the most inefficient and wasteful re-distributer of wealth known to man, the government. This is neither the government’s responsibility nor their strong suit.
If Mr. Gruber is so concerned about helping low income citizens, then he should feel free to donate to the Zero Pay Fund which helps the poor get healthcare services through private donations and funding. Or, if Gruber is dead set on relying on the government for this, then he is free (as is every other American) to donate to the United States government to help balance their budgets which have been drained through a host of various unsustainable entitlement programs. Donations can be made here.
This quote is also based on the old false philosophy of “Why don’t you donate the money used for that candy bar to help the poor.” The problem is, and always has been, that forcing people to “help” the poor by disallowing them to purchase goods actually causes more poverty by forcing an artificial decline in demand for the goods (in this case aspirin and glasses) that individuals rely on to make a living. Another important question to consider is: Who did more for the poor, Mother Theresa or Bill Gates? The first inclination is to think of Mother Theresa for her genuine and tireless efforts to help the less fortunate; however, when businesses are given an opportunity to grow through favorable economic policies and lower taxes, thousands of people become members of the workforce earning their own paychecks. Mother Theresa helped alleviate the effects of poverty and was a great woman; Bill Gates was able to take the poor out of poverty. The success of Microsoft has provided for thousands of jobs directly and thousands more indirectly, increasing the amount of money for individuals, families, and to help the less fortunate. Economics and history clearly show that when unemployment is low and industries are booming, the result is a much better quality of life and considerably less poverty. The old adage is still true, “Give a man a fish and he’ll eat for a day, teach a man to fish and he’ll eat for a lifetime.”
If the government focused less on entitlement programs (including healthcare) and focused more on allowing economic growth and prosperity the end result would be more freedom, better living standards, and less poverty. Stop giving away other people’s “fish” and allow them to start “teaching”.