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FSAs part of health care vote

By Kay Bell · Bankrate.com
Thursday, June 7, 2012
Posted: 3 pm ET

You'll hear a lot today about a House vote to repeal a portion of President Barack Obama's health care law.

The Republican leadership is pushing the measure, which would repeal the provision in the 2010 Patient Protection and Affordable Care Act, informally referred to as Obamacare, that starting next year would impose a 2.3 percent tax on medical devices.

The vote is getting a lot of attention because it's the latest GOP effort to dismantle the health care law.

The provision's cost also is eye-catching. It's projected to raise nearly $30 billion over the decade after it takes effect to pay for other parts of the law.

Then there are the medical device manufacturers, which include major corporations such as General Electric and Baxter International, who support the tax repeal.

The public policy watchdog group Citizens for Tax Justice notes that GE has paid an average federal income tax rate of 2 percent over the last 10 years, while medical giant Baxter had a 2008-2010 average federal income tax rate of negative 7.1 percent.

FSAs also included

But one thing that has slipped by in the debate is a provision that would benefit thousands of workers with flexible spending accounts, or FSAs. Under these workplace benefit plans, employees set aside pretax dollars to pay for treatments that aren't covered by their health insurance.

The bill to kill the medical device tax also would let FSA owners once again use their account money to pay for over-the-counter medications. That restriction, which kicked in at the beginning of the 2011 tax year, also was part of the health care law.

Too bad for both the medical device makers and FSA owners the repeal won't take effect.

Sure, the Republican-controlled House will approve the measure. But it's highly unlikely it will make it through the Senate, which has a slim Democratic majority.

And even if that did happen, Obama has vowed to veto the bill.

So why is Congress doing this? For show. And expect to see more such symbolic votes this hotly contested election year.

Too close to call

Another divisive health-related vote is too close to call. I'm talking about the California vote to increase the state's cigarette excise tax.

The latest vote count shows that the tax hike was defeated by a razor-thin 50.8 percent margin. But there still are ballots to be counted and state election and tax officials say they can't yet declare a formal result.

Stay on top of federal and state tax news and tax-cutting tips by subscribing to Bankrate's free Weekly Tax Tip newsletter.

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