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Conservatively Speaking

State Senator Mary Lazich (R-New Berlin) represents parts of four counties: Milwaukee, Waukesha, Racine, and Walworth. Her Senate District 28 includes New Berlin, Franklin, Greendale, Hales Corners, Muskego, Waterford, Big Bend, the town of Vernon and parts of Greenfield, East Troy, and Mukwonago. Senator Lazich has been in the Legislature for more than a decade. She considers herself a tireless crusader for lower taxes, reduced spending and smaller government.

Senate Health Committee holds hearing about HSAs

Legislation


The state Senate Health Committee that I serve on conducted a public hearing this week about Senate Bill 425 (SB 425) that would create an income tax credit for certain holders of health savings accounts (HSAs).

Federal law allows individuals to make tax-deductible contributions to HSAs and take money out tax-free to cover routine and preventive medical care.

According to the Legislative Reference Bureau, SB 425 allows individual contributors to HSAs to claim a nonrefundable income tax credit for 6.5 percent of the allowable amount that the individual claims as a federal tax deduction or 6.5 percent of the federal tax−exempt earnings relating to an HSA, or both.

The following are not eligible for the credit: Single individuals, heads of household, a married person that files a separate return whose Wisconsin adjusted gross income exceeds 500 percent of the federal poverty level, or a married couple that files Wisconsin adjusted gross income in excess of 500 percent of the federal poverty level.

Democrat authors of the bill testified that this would make Wisconsin the first state in the country to limit availability of HSAs based on income. The income cap raises the distinct possibility that many businesses would be unable to participate.

I expressed concern at the hearing to state Senator Pat Kreitlow (D-Chippewa Falls) and state Representative Kristen Dexter (D-Eau Claire) the authors of SB 425 about the provision discriminating against those earning beyond 500 percent of the poverty level. The limit creates a scenario where an employer that has varying pay levels would not be able to provide the full enhanced benefit to some employees. Only certain workers would be able to take advantage.  
 
Senator Kreitlow responded that 500 percent of the poverty level for a family of four amounts to over $100,000. Senator Kreitlow believes individuals at that level will not be concerned about the loss of the tax credit. However, I point out that Senator Kreitlow’s testimony came one day after all Democrats in the state Senate voted to allow conversions of traditional IRAs to Roth IRAs without income limits. There seems to be an inconsistency in that line of thinking.

Representatives of the Wisconsin Independent Businesses (WIB) and the Wisconsin chapter of the National Federation of Independent Business (NFIB), while supportive of the concept of SB 425, testified the bill is too limited and that Wisconsin should make HSAs tax-deductible for everyone. I agree with that position.

Republicans have been promoting the concept of HSAs for quite some time. While it is a bit encouraging to see some on the other side of the aisle embrace HSAs, it is an idea that should be administered properly and afforded to all that wish to participate.

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