Opinion: Michelle Steel: End the unnecessary and harmful taxation of Californians’ health care savings
California’s uniquely high cost of living has permeated every industry, and health care is no exception. Health care spending in California totaledNearlyhave delayed going to the doctor and receiving the care they need because of the cost. This is unacceptable. Even worse, when Californians try to save for their healthcare costs, our state taxes them for it.
Many Americans open Health Savings Accounts to save money on current and future health care costs including medical, dental, vision, and prescription expenses. Nationwide, there are over 35 million HSA accounts, and the U.S. is expected to approach 43 million accounts by 2025. Over half of individuals with an HSA live in zip codes where the median income is below $75,000 annually. In California, over 5 million people, including dependents, are covered by an HSA.
For most of the country, HSAs are tax free, and they are not subject to federal income tax. However, California taxes HSA contributions and taxes employers who contribute to their employee’s HSA. Workers who save money in these accounts to help lower their monthly premiums or pay for out-of-pocket medical expenses, and employers who decide to contribute to an employee’s HSA get taxed for trying to cover these necessary health care costs.
Here’s an example: Angela is a California employee who is enrolled in family coverage through her consumer directed health plan. She contributes $3,000 to her HSA through payroll and her employer contributes $1,000 to the HSA. For federal income tax purposes, Angela and her employer’s HSA contributions are pre-tax and tax-free.
This is a direct attack on low and middle-income families by a state that is intent on taxing its hardworking citizens in any way possible. This tax on health care savings is so unusual that, outside of California, only New Jersey punishes families who rely on HSAs in this way.
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