Members of the state House said Wednesday that they’d like to restore a tax deduction for seniors’ medical expenses, but they’re not sure how to pay for the tax break’s $37.9 million annual cost.
Legislators have received a deluge of emails and letters from older residents who are doing their taxes for the first time under a major overhaul of North Carolina’s tax system. The change was designed to eliminate a variety of tax breaks and lower overall income tax rates.
But some seniors with high medical bills have found their tax liabilities have grown exponentially from last year’s filing.
“While we were intending to lower the taxes on all citizens, senior citizens got their taxes raised,” said Rep. Rick Catlin, a Wilmington Republican. Catlin has sponsored legislation, House Bill 46, to restore the medical expense tax deduction.
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He said one couple he talked to saw their tax bill increase by $1,600 from last year. “From my district, I’ve got pages and pages of signatures saying, ‘Please help us,’” he added.
Members of the House Aging Committee – many of whom are seniors – said they’re sympathetic.
“I did my taxes, and I’m having to pay more this time too,” said Rep. Pat Hurley, an Asheboro Republican and chairman of the committee. “I don’t know the answer. … We do need to look at it very closely.”
Sindy Barker lives at Carol Woods Retirement Community in Chapel Hill, where she said the change is a major concern as residents file their taxes. Barker hasn’t done hers yet, but she expects she’ll be paying more because she and her husband sometimes spend $9,000 a year on prescription drugs alone.
“My story is not unusual in retirement communities,” Barker said. “This medical deduction elimination has really presented us with some real hardships.”
Catlin’s bill doesn’t propose how to pay for the deduction, and he said “finding the funding for that is a problem.”
But he contrasted his effort with legislation that passed the House last week and would give certain companies incentives or tax breaks in the name of job creation.
The incentives bill, called N.C. Competes, increases the cap on incentives for new jobs by $22.5 million, and it extends a jet fuel tax break for American Airlines estimated to cost the state $10 million a year. It passed the House last week and is awaiting a hearing in the Senate rules committee.
“I argued against our incentives bill because I’d rather help our senior citizens,” Catlin said.
Catlin’s position underscores a tension developing in this legislative session as lawmakers face questions about the tax overhaul. Which groups, if any, will get their tax break back? Companies say they could take jobs elsewhere without incentives. Seniors tend to vote in higher numbers than other age groups.
Seniors aren’t the only group that wants the medical deduction back. Rep. Beverly Earle, a Charlotte Democrat, said parents of children with costly disabilities should also get a break. “I’d hate to pit one group against another as we go forward,” she said.
Several legislators asked about the cost of allowing taxpayers of all ages to take the deduction, particularly if their medical expenses are uniquely high. That estimate wasn’t available Wednesday.
The Aging Committee won’t take a vote until next week at the earliest. If it approves, the bill would go to the Finance Committee before the full House would vote. It’s unclear whether the bill would get support in the Senate, where Republicans have been less supportive of tax breaks.
Rep. Joe Sam Queen, a Waynesville Democrat, said seniors need the break more than most. “Without question, seniors that are over 65 don’t have the flexibility of any other population age,” he said. “It’s not been fair for them.”
At least one senior group is becoming more political after the tax change. Barker’s group, the N.C. Continuing Care Residents Association, is forming a legislative committee.
“They feel like we ought to have been watching,” she said.