House Health Bill Leaves a lot to be Desired

November 5, 2009

The House finally got their collective act together, last week, and published the “Affordable Health Care for America Act.”

            Hardly “affordable,” in our view, and less about “care” than control of yet another aspect of life in this country.
            By now, you may have heard some of the “highlights,” which include:
  1. Demand that employers provide health insurance to their employees or, if they “choose” otherwise, pay a new tax equal to 8% of their payroll. Small employers (those with annual payroll costs of less than $500,000) would be exempt, and an estimate has already been advanced that due to the exemption, a mere 14% of employers would be left to pay the freight. Nice.
  2. Demand that individuals be required to obtain health insurance coverage or pay a new tax equal to the lesser of 2.5% of their income above the tax return filing threshold, or the average premium established on the insurance “exchange.”
  3. Take away the present availability of health flexible spending accounts to reimburse folks for over-the-counter medications.
  4. Impose a new 5.4% tax on modified adjusted gross income in excess of $1 million for joint tax return filers to further supplement the cost of all of this social engineering.
Sigh.
And from our “nice try” department, this week, cometh word from the Tax Court
in the case of William G. Halby–a tax attorney, no less, who actually sought to claim medical expense deductions totaling over $76,000 in 2004 and 2005, for costs of prostitute visits, sex therapy books and pornographic materials, claiming the “positive health effects of sex therapy!” And this, notwithstanding the illegality of his conduct, and the fact that his doctor did not prescribe these “treatments!”
            Seems that in New York, the taxpayer’s state of residence, prostitution is illegal. Not surprisingly, the tax law provides that a taxpayer is not entitled to a medical expense deduction for any illegal operation or treatment. Similarly, payments for books and magazines on sex therapy and pornography were deemed not to have been made for the treatment of a medical condition, but were instead “personal” disbursements.
            And to add insult to injury, the Court sanctioned the IRS’ imposition of the accuracy-related penalty because the attorney taxpayer had no legitimate case, should have been aware of the illegality of his trysts, and the fact that case law in no way supported his claimed deductions.
            Given the likelihood that the Pelosi proposals might just drive more than one taxpayer to drink, we can hardly wait for the bloke who tries to deduct his booze bill…
CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation.
            Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He is also a contributor to the twelfth edition of Tax Savvy for Small Business, published by Nolo. He can be reached at 831-7288, and welcomes comments below.

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