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Republicans urge Newsom to end taxes on health savings accounts like 48 other states

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(The Center Square) – Five members of California’s Republican congressional delegation sent a letter to Governor Gavin Newsom urging him to put an end to California’s tax on health savings accounts (HSAs), emphasizing that taxing such accounts negatively affects over 5 million Californians who rely on them to cover healthcare expenses. The representatives highlighted the need to allow HSA accountholders to retain their hard-earned money and ensure access to essential healthcare services without additional taxation and align California with the 48 other states that do not tax the accounts.

Nationally, one can place tax-free money into savings accounts that can be used for qualifying health expenses, and are typically used by fiscally constrained individuals seeking higher deductible but lower premium plans. In California and New Jersey, however, money placed into HSAs is taxed, eroding the cost-savings benefits enjoyed by HSA accountholders in the nation’s 48 other states. In the 48 other states, income earned from HSA assets is also tax-free, making it even easier for accountholders to save for health expenses in the long run.

“We must allow HSA accountholders to keep more of their hard-earned money, prevent further taxation from the State of California, and allow our constituents to adequately pay for necessary health care including medical, dental, vision, and prescription expenses,” wrote the signatories to the letter ​​spearheaded by Rep. Michelle Steel (R–Garden Grove) and signed by Reps. Young Kim (R–Yorba Linda), David Valadao (R–Bakersfield), Mike Garcia (R–Santa Clarita), Kevin Kiley (R–Alpine), Ken Calvert (R–Palm Springs), and Jay Obernolte (R–Victorville). “With this taxation in place, there are serious concerns that Californians may not seek access to care, worsening health care outcomes and costing more for the patient and the taxpayer in the long-run.”

The authors also noted In the face of rapidly rising healthcare costs, HSAs are the last line of defense, creating health insurance premiums lower-income Americans can afford and that they and their employers can pay into to fund deductibles and other expenses.

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