Private Health Savings Accounts: Don’t Create Jobs, Hike Deficit
Plan Not Paid For, Overwhelmingly Benefits Wealth Individuals
MADISON, Wis. — The Republican plan to give a tax break to high deductible private health savings accounts would increase the deficit $48 million in the next two years, create no jobs and would not increase access to health care. The plan is to be debated today at a joint legislative health committee.
“Wisconsin deserves a straight answer to two simple questions,” said Scot Ross, One Wisconsin Now Executive Director. “What are the jobs this tax break for the wealthy will create, and what will Republicans cut to pay the $48 million cost?”
The state faces a $3.3 billion budget deficit and the non-partisan Wisconsin Legislative Fiscal Bureau has put the cost of the Republican health savings account tax plan at $48 million over the biennium. No available research shows that tax breaks for private health savings accounts have created private sector jobs. Critics have long argued that costly tax breaks for HSAs are little more than a way for the wealthiest to further shelter their assets, while providing little benefit to those unable to save money in advance for future health care costs. [Legislative Fiscal Bureau, 1/10/11]
In addition, health savings accounts are primarily beneficial to those who are healthy, leaving those with real health care needs with little benefit. Health care costs are the number one reason why Americans declare bankruptcy. Private health savings accounts are particularly exclusionary for young adults, many of whom are saddled with student loan debt and unable to commit additional savings to a private health savings account.
A study from the federal Governmental Accountability Office showed the following about the skewed benefits of HSAs:
- The average adjusted gross income of HSA participants was $139,000.
- Nearly half of HSA participants reported withdrawing nothing from their HSA, evidence that it is serving as a tax shelter for wealthy participants.
- The highest income participants in HSAs had a much higher contribution to their HSA, proving that it is a benefit in which the wealthier derive more of a benefit than middle class earners.
- [Government Accountability Office, 4/1/08; Center on Budget and Policy Priorities, 5/19/2008]
Cullen Werwie, spokesperson for Gov. Scott Walker was asked by the media about whether the current HSA tax structure was inhibiting business from providing the plans:
However, neither Werwie nor others involved with the issue said they were aware of any business that was holding off on high deductible plans because of the state tax issue. [Milwaukee Journal Sentinel, 12/9/10]
“The evidence is clear: a $48 million tax break for health savings accounts will overwhelmingly benefit the wealthy, is not paid for and will not create jobs,” said Ross. “Worse, this tax break for private health savings accounts will do nothing to reduce health care costs, nor improve access to those most needing care.”