INCOME TAX CREDIT: HEARING AIDS S.B. 403 (S-1):
REVISED COMMITTEE SUMMARY
[Please see the PDF version of this analysis, if available, to view this image.]
Senate Bill 403 (Substitute S-1)
Sponsor: Senator Tupac A. Hunter
Committee: Finance
Date Completed: 9-20-10
CONTENT
The bill would amend the Income Tax Act to allow a qualified taxpayer to claim a nonrefundable credit equal to the cost paid in the tax year to purchase a hearing aid for himself or herself or his or her spouse, if he or she were over 60 years old, or a dependent of the qualified taxpayer, for tax years beginning after December 31, 2010. The credit could not exceed $1,500 for each tax year. A "qualified taxpayer" would be a taxpayer whose household income was less than $100,000.
"Household income" would mean that term as defined in Section 508 ("all income received by all persons of a household in a tax year while members of a household").
A "dependent" would be an individual for whom the taxpayer claimed an exemption under Section 30(2) of the Act for the same year for which the hearing aid credit was claimed. (That section allows a taxpayer to claim a personal exemption for each personal or dependency exemption allowable on his or her Federal income tax return.)
"Hearing aid" would mean that term as defined in the Occupational Code ("an instrument or device designed for regular and constant use in or proximate to the human ear and represented as aiding or improving defective human hearing").
Proposed MCL 206.273 Legislative Analyst: Suzanne Lowe
FISCAL IMPACT
The bill would decrease income tax revenue by approximately $7.0 million. The actual revenue loss would depend upon on the number of individuals affected by the bill, the cost of hearing aid purchases covered by the bill, and the change in consumption of hearing aids after the bill was enacted. Proposals exist to offer a $500 Federal tax credit for similar purchases and the bill would not reduce the State credit for any potential Federal credit for the same purchase. Also, the bill apparently would provide the credit to any Michigan taxpayer, no matter how minimal his or her financial relationship with the State.
It appears that the bill would not generate a credit if Medicaid or a third party insurance company paid for the hearing aid. It is unclear if the costs of purchasing a hearing aid also would include costs for fitting, hearing evaluations, and other related expenses. To the extent that the bill would allow a credit for costs even if ultimately paid by a third party such as Medicaid or insurance, the impact would rise to approximately $11.4 million.
The impact assumes that consumption of hearing aids effectively would double under the bill. Consumption could more than double because, based on national data, the bill would be covering somewhere between 45% and 100% of the total cost of a hearing aid (depending on whether an individual needed two aids or one, and what costs were included). To the extent that consumption of hearing aids increased by more than estimated, the revenue reduction under the bill would be greater.
Any revenue loss would likely result from taxpayers claiming a credit, rather than through reduced withholding. Therefore, the entire revenue reduction under the bill would affect the General Fund.
Fiscal Analyst: David Zin
Analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent. sb403/0910