What makes the hurry-up tax bill recently passed by the U.S. Senate look like a good deal for older Americans? The one passed by the House of Representatives, according to the policy analysts at AARP.
The national organization representing people 50 and older has its lobbying-and-communications machine chugging in high gear these days, trying to avert what it sees as a financial disaster for elders with high health care needs and insufficient millions in their retirement funds to pay for them.
H.R. 1, resoundingly called the Tax Cuts and Jobs Act, passed in November on a vote of 227 to 205. Local representatives Vern Buchanan (R-Longboat Key) and Tom Rooney (R-Punta Gorda) were among those who thought it was a good idea. The Senate version passed on a vote of 51-49 exactly one month after the House bill saw the light of day. Now they're hashing out the differences.
You've probably heard about the bills' changes in store for corporations and wealthy heirs and struggling grad students. But AARP wants you to pay attention to what could happen to your ability to deduct high medical expenses on your federal tax claims, and — even tougher to grasp but potentially even more devastating — what could happen to Medicare funding if and when these tax cuts result in higher federal deficits.
First, the medical deduction: When you're young and robust, you probably don't spend 10 percent of your annual income on doctor visits and drugs. But past a certain age, it's easy to reach that threshold, especially with new hearing aids or cataract surgery or extensive dental work in a given year. According to AARP, more than 634,000 Florida taxpayers itemized their medical expenses for a deduction in 2014, with an average saving of $1,500 to $2,500 in taxes.
About 75 percent of all taxpayers who claim this deduction are 50 or older, said Cristina Martin Firvida, AARP's director of financial security, and the average medical expense total is $10,157 per household.
"That average masks the reality that some individuals claiming this deduction have extremely high out-of-pocket costs," of $30,000 or higher, she added. "Their medical expenses are the bulk of what they spend each year. They spend more on health care than on housing."
The Senate bill would keep the medical deduction, while the House version would not. Both create incentives for taxpayers to skip the itemizing process, by nearly doubling the standard deduction to roughly $12,000 per person. This apple-and-orange exchange makes it tricky for most Americans to figure out whether they'd be better off under the current system or the new one — but Martin Firvida said the folks at AARP have been crunching the numbers.
"One thing we have heard form our analysts here is that even with the doubling of the standard deduction in the House bill, there are a lot of filers who would still lose out," she said.
Meanwhile, taking a longer view, AARP sent a letter to Congressional leaders last week expressing alarm about the future of Medicare.
"The Congressional Budget Office recently provided an explanation of the impact H.R. 1 and its $1.5 trillion deficit increase will have on Medicare and other programs," the letter said. "The CBO estimated that because of statutory pay-as-you-go and the increase in the deficit, Medicare providers will be subject to an automatic $25 billion cut in fiscal year 2018, and additional cuts in subsequent fiscal years."
Yikes.
Barbara Peters Smith is the aging reporter for the Herald-Tribune, and the editor of Health+Fitness. Call her at 941-361-4936 or email barbara.smith@heraldtribune.com. On Twitter: @BarbaraPSmith.