AB 1831, as amended, Conway. California Health Insurance Fairness Act: personal income tax: deduction: medical insurance.
The Personal Income Tax Law provides for various deductions in computing the income that is subject to the taxes imposed by that law including in modified conformity with federal tax law, a deduction for that portion of medical expenses that is more than 7.5% of adjusted gross income. Self-employed individuals may deduct health insurance premiums for medical expenses incurred by the taxpayer in lieu of the itemized deduction for medical expenses.
This bill, for taxable years beginning on or after January 1, 2014, would allow a deduction from gross income under the Personal Income Tax Law for the amounts paid or incurred by a taxpayer during the taxable year for medical insurance for medical care, as defined, and for transportation for and essential to that medical care, as provided. The bill would not allow as an itemized deduction, an amount allowed as a deduction from gross income as provided in the bill.
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
This act shall be known, and may be cited, as the
2California Health Insurance Fairness Act.
The Legislature finds and declares all of the following:
4(a) In 2010, Congress passed the Affordable Care Act,
5commonly known as “Obamacare,” which mandates that
6individuals obtain health insurance. This mandate is known as the
7individual mandate.
8(b) Under Obamacare, all Californians are forced to obtain
9health insurance by March of 2014.
10(c) Under both federal and state tax laws, employer-paid
11insurance benefits are excluded from taxation and paid for with
12pretaxable income.
13(d) According to the Kaiser Family Foundation, four million
14Californians do not get their health insurance paid for by their
15employers and, in order to meet the federal mandate, they will
16have to obtain health insurance or face a penalty imposed by the
17IRS of up to 1 percent of their 2014 income, 2 percent of their
182015 income, and 2.5 percent of their 2016 income. Tax penalties
19for uninsured children are one-half of the penalty for an adult.
20(e) begin deleteIndividuals end deletebegin insertBoth individuals end insertand families with an income in
212014 that is between 138 percent and 400 percent of the poverty
22level will be able to purchase health insurance through Covered
23California and will receive a tax
subsidy to offset all or part of the
24health insurance premium. If the individual’s or family’s income
25is less than these percentages, that individual or family may qualify
26for Medi-Cal.
27(f) The Kaiser Family Foundation estimates that 52 percent of
28Americans who buy individual insurance today would not be
29eligible for subsidies to help offset the cost of health care. The 48
30percent that do receive subsidies would receive an average of
31$5,548 per year, which would only cover 66 percent of the cost.
32Most individuals will face higher premiums and higher taxes to
33pay for those subsidies that others will receive.
P3 1(g) Around 1.2 million Californians do not receive
2employer-paid health insurance and are not eligible for Medi-Cal
3or other taxpayer paid insurance programs and must
purchase their
4health insurance directly from an insurer. Individuals and families
5must buy their health insurance with after-tax dollars if they are
6ineligible for a subsidy or the subsidy does not cover the full cost
7of the insurance, making their health insurance more expensive.
8(h) Under existing California law, a taxpayer is able to deduct
9medical expenses, including the cost of purchasing health
10insurance, that exceed 7.5 percent of their adjusted gross income.
11
Any medical expense below 7.5 percent of their income is not tax
12deductible. Only taxpayers that itemize their deductions can take
13the deduction. Because that threshold is so high, many taxpayers
14do not get any tax benefit, thus making the cost of their insurance
15more expensive.
16(i) Bringing the threshold from 7.5 percent down to 0 percent
17will level the playing field between those who receive insurance
18from an employer and those purchasing it in the individual market.
19It would also reduce the number of uninsured and, accordingly,
20would reduce the costs associated with providing health care to
21the uninsured.
Section 17072 of the Revenue and Taxation Code is
23amended to read:
(a) Section 62 of the Internal Revenue Code, relating
25to adjusted gross income defined, shall apply, except as otherwise
26provided.
27(b) Section 62(a)(2)(D) of the Internal Revenue Code, relating
28to certain expenses of elementary and secondary school teachers,
29shall not apply.
30(c) Section 62(a)(21) of the Internal Revenue Code, relating to
31attorneys fees relating to awards to whistleblowers, shall not apply.
32(d) Section 62(a) of the Internal Revenue Code is modified to
33additionally provide that the amount allowed as a deduction under
34Section 213(d)(1)(D) of the
Internal Revenue Code shall be allowed
35as a deduction for purposes of computing adjusted gross income,
36except as otherwise provided.
37(1) For purposes of this subdivision, Section 213(d)(1)(D) of
38the Internal Revenue Code is modified to provide that the phrases
39“(including amounts paid as premiums under part B of title XVIII
40of the Social Security Act, relating to supplementary medical
P4 1insurance for the aged)” and “or for any qualified long-term care
2insurance contract (as defined in section 7702B(b))” shall not
3apply.
4(2) Any amount allowed as a deduction under this subdivision
5shall not be allowed as an itemized deduction under Section 63 of
6the Internal Revenue Code, relating to taxable income defined, as
7applicable, for purposes of this part.
8(3) This subdivision shall apply to taxable years beginning on
9or after January 1, 2014.
This act provides for a tax levy within the meaning of
11Article IV of the Constitution and shall go into immediate effect.
O
97