Topeka Medical expenses not covered by insurance would be tax deductible for Kansas residents under a House bill.
The proposal, heard Friday by the House Taxation Committee, also would allow those without employer-based health coverage to deduct money spent on an insurance plan.
Under the current system, money for a health insurance plan through an employer is taken out of a paycheck before taxes. But Ken Daniel, owner of Midway Wholesale in Topeka, said people who don't have the option of buying into an employer's plan often are at lower-paying jobs. They must use taxed income to buy their coverage.
"This is the most regressive thing we have in the tax code," Daniel told the committee.
The Kansas Department of Revenue estimated that deductions for medical expenses would cost the state $80 million in tax revenue and that number could more than double if deductions for buying insurance in the private market are included.
According to Rachel Smit, a policy analyst with the Kansas Health Institute, Kansas residents who buy health coverage through their employers save an average of $2,900 in taxes each year.
The federal government already allows taxpayers to deduct the cost of medical care if it exceeds 7.5 percent of their gross adjusted income.
Corrie Edwards, executive director of the Kansas Health Consumer Coalition, said people with health insurance sometimes end up paying a lot for medical expenses.
"I don't know a lot about tax codes, but when this bill came across it looked like a small proactive step toward giving the average Kansan a break," Edwards said.
Derrick Sontag, state director for the National Federation of Independent Business, wrote in his testimony that the measure would help small businesses that don't receive the same tax credits as bigger businesses for contributing to the health insurance or flexible spending accounts for their employees.
"This legislation would help level the playing field by removing the competitive disadvantage small businesses face when not offering health benefits," Sontag wrote.