Larry Jordan

Everyone is related, and everything is connected.

Income Taxes Part III: Medicaid

Jul 18, 2022 by Larry Jordan, in Taxes
I used to think that my tax situation was “typical.” I filed married filing jointly, with two incomes and two kids. My employer provided health insurance and a 401k plan and withheld for income taxes, Medicare, and social security. There is nothing “typical” about that.

Less than half of American households file married filing jointly. According to the IRS, the average adjusted gross income (AGI) for a married filing jointly return is $117,795. The average AGI for a head of household return is $35,876, and the average AGI for a single return is $34,940.

When I ask clients if they are married and if they have children, I might hear something like this, “I haven't seen my husband in years. I support my daughter, but my husband tries to claim her, too. I live with my boyfriend and his son, but his ex-wife claims their son every other year, according to their divorce decree. This year, we also supported my nieces while my sister was serving in Iraq.”

Many employers don't offer health insurance or retirement benefits, and many employees can't afford to contribute to health insurance or retirement savings, even if their employers offer them.

Also, many people work as contractors, rather than employees, so they do not work regularly, they do not receive benefits, and they pay their own income taxes, as well as their own self-employment taxes. Some employers, such as Uber, charge contractors commissions and require them to use their own cars.

As a result, many low- and moderate-income people work several jobs, often contract jobs or part-time jobs or seasonal jobs or temporary jobs, none of which provide benefits. A lot of our clients have trouble even finding the time to file their taxes, due to child care arrangements and work commitments.

The federal minimum wage is $7.25 per hour, which equals $15,080 per year for a full-time employee. In Texas, for a family of four, the poverty level is $24,300 and 200% of the poverty level is $48,600.

One in four Texas children live in poverty, and poverty rates for Black and Hispanic children are nearly three times higher than for White children. Fifty percent of families in poverty are headed by females.

For a family of four, the income limit for Children's Medicaid is $32,499 and the income limit for the Children's Health Insurance Program (CHIP) is $48,513.

Lots of our clients rely on these programs. According to the Texas Health and Human Services Commission, 43% of Texas children rely on CHIP or Medicaid, and 64% of Texas nursing home residents rely on Medicaid.

When you hear about cuts to Medicaid, think about who will care for our children and our parents.

To be continued...