Acne Cream? Tax-Sheltered. Breast Pump? No.

As part of the new health reform bill, a handful of medical expenses will result in a break for American taxpayers. Dentures, acne cream, and even artificial turf for children with allergies are all viewed as medical expenses by the IRS. However, nursing mothers will not be allowed to use tax-sheltered health care accounts to pay for breast pumps, since the IRS has ruled that breastfeeding does not qualify as a form of medical care.

NY Times.com reports

With all the changes the health care overhaul will bring in the coming years, it nonetheless will leave those regulations intact when new rules for flexible spending accounts go into effect in January. Those allow millions of Americans to set aside part of their pretax earnings to pay for unreimbursed medical expenses.

While breast-feeding supplies weren’t allowed under the old regulations either, one major goal of the health care overhaul was to control medical costs by encouraging preventive procedures like immunizations and screenings.

Despite a growing body of research indicating that the antibodies passed from mother to child in breast milk could reduce disease among infants — including one recent study that found it could prevent the premature death of 900 babies a year — the I.R.S. has denied a request from the American Academy of Pediatrics to reclassify breast-feeding costs as a medical care expense.

In some respects, the biggest roadblock for mothers’ groups and advocates of breast-feeding is one of their central arguments: nursing a child is beneficial because it is natural.

I.R.S. officials say they consider breast milk a food that can promote good health, the same way that eating citrus fruit can prevent scurvy. But because the I.R.S. code considers nutrition a necessity rather than a medical condition, the agency’s analysts view the cost of breast pumps, bottles and pads as no more deserving of a tax break than an orange juicer.

Read more here

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Nickel and dimed by Obama's microtaxes

According to a Fortune magazine survey almost half of taxpayers feel they aren’t getting what expect with their tax dollars. To add to this, some taxpayers will be soon paying a lot more in taxes. The taxing nuggets President Obama has included within the health care reform act are being referred to as a “nickel and diming” tactic because of the variety of new taxes sprinkled throughout the bill that target high earners.

I started to talk about these proposed taxes back in April on my blog here. The reform act includes a 3.8% tax on interest and dividends. There will also be a .09% increase in the Medicare payroll tax. Currently the Medicare payroll tax is 2.9% on all wages, with the worker and his employer each paying 1.45%. Under the new 2013 Medicare payroll tax increase a high income individual will be paying 2.35% of their wages.

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Senate Bill Removes ‘Botax,’ Adds Tanning Tax

The Democratic leadership decided to remove the 5% plastic surgery tax from the latest draft of their health care reform bill. The tax was expected to generate $5 billion in federal revenue, and to make up for the loss they have replaced it with a 10% tax on indoor tanning services.

According to the Wall Street Journal, the change is a victory for the American Medical Association, which urged lawmakers to remove the cosmetic-surgery tax after Sen. Reid included it in a draft of the bill he unveiled in November. The medical industry argued that the tax effectively discriminated against women, since they’re more likely to undergo such procedures.

The tanning tax is part of a last-minute package of amendments that are expected to be included in the final bill. It grants an exception for “phototherapy” services that are performed by licensed medical professionals.

Reform Tax Would Hit H1N1 Vaccine Manufacturers

From Politico.com:

In an attempt to illustrate the real world consequences of reform's taxes, Senate Republicans are pointing out a provision that would tax the makers of swine flu vaccines and drugs. The provision raises $2.3 billion annually from drug makers who sell their products through government programs.

“When everybody is coming together to fight a possible pandemic the last thing the government should be doing is taxing the people who manufacture the vaccines and the drugs to treat H1N1 flu,” said a Senate Republican leadership aide.

Cosmetic Surgery Tax Talk

While reading my favorite tax blogs, I came across this entry from Don’t Mess with Taxes on the newest suggestion to help pay for health care reform: taxing cosmetic surgery.

To be precise, they {congress} want the beautiful people who got their good looks thanks to plastic surgery to pay.

According to the Drudge Report (via Tax Policy Blog), Senate Finance Committee members have discussed imposing a 10 percent excise tax on cosmetic surgery deemed unnecessary for medical purposes.

Personally, I plan to continue to age gracefully, mainly because my pain threshold is markedly lower than my vanity threshold, so this proposed tax wouldn't affect me. But I still think it's a bad idea.

It singles out a group of taxpayers who, for the most part, already foot these types of medical bills on their own since tax law doesn't allow for purely cosmetic surgery costs to be counted as deductible expenses.

Moreover, it makes the implicit assumption that folks getting face-lifts or tummy tucks or various enhancements are wealthy. That's not necessarily true.

Oakland Council Backs a Tax on Marijuana

From the Wall Street Journal.com:

Leaders of this economically hard-hit city are proposing to tax medical marijuana as a way to help close a record budget shortfall.

Oakland's City Council last week approved a 1.8% tax on medicinal marijuana sold in the city. If voters pass the proposal in a July election, Oakland would become the nation's first city to directly tax the drug, medical-marijuana advocates say.

Such an outcome would further legitimize medical marijuana in California and represent the latest victory for advocates. Prospects for such a tax were made brighter in February, when U.S. Attorney General Eric Holder announced that the federal government would no longer raid state-approved dispensaries.

Backers of the Oakland tax on dispensaries said they hope to encourage other cities to follow suit. The tax would prove "that government-regulated dispensaries are good neighbors," said James Anthony, a lawyer who represents the Harborside Health Center, one of Oakland's medical-marijuana dispensaries.

California is one of 13 states that have legalized medical marijuana, allowing it to be sold to people with a doctor's recommendation. It is relatively easy for anyone over 18 years old to obtain such a doctor's note. Advocates estimate there are 200,000 or more approved medical-marijuana users in California. Users already pay a sales tax on the drug.

A city tax on medical marijuana could generate at least $400,000 and perhaps more than $1 million annually, said Rebecca Kaplan, the Oakland City Council member who pushed the proposal. The city of 400,000 residents is facing an $83 million shortfall in a $455 million budget.

The owners and managers of Oakland's four medical-marijuana dispensaries said they approached the city with the idea. "We wanted to further legitimize the medical-marijuana paradigm to show that we are truly willing to assist [Oakland], and to show other cities that there are social benefits to this," said Keith Stephenson, executive director of Purple Heart Patient Center.

No formal opposition has formed against the proposal, and Ms. Kaplan and medical-marijuana advocates said they are confident voters will approve it.

But Paul Chabot, a Southern California resident who recently founded the Coalition for a Drug Free California, is opposed to the idea because he thinks the "quasi-legalization" of marijuana would add more of the drug into the black market. "It's a front; it also sends the wrong message to children," he said. "What are you doing to do next, allow prostitution and tax that? Allow methamphetamine to be sold and tax that?"