The Senate and Assembly passed the second of Gov. Scott Walker’s special legislative session bills dealing with the state tax on health savings account contributions Thursday night.

Walker said in a statement he hopes the bill, which provides for tax deductions on HSA contributions, will lower costs for employers and allow the private sector to create jobs.

“The passage of a tax deduction for HSAs is an important step to saving taxpayers’ money and making healthcare more affordable for employees and small businesses,” Walker said. “Lowering costs and increasing flexibility for employers will help create an environment where the private sector can create 250,000 jobs.”

Ten Democrats voted for the HSA bill, two in the Senate and eight in the assembly. Aside from the ten votes, most Democrats said they feel the bill is misguided, and its $48 million price tag with no job creation guarantee is not worth it.

“The people who I represent who don’t have a job – and I suspect the people across the State of Wisconsin as well – would rather have us take that $48 million and use it for something that will help them get a job,” said Sen. Tim Cullen, D-Janesville. “If we are going to engage in deficit-spending, let’s do it to help businesses start up and add jobs.”

Wisconsin is one of the only states in the country that places a tax on HSAs, and it does not conform to federal HSA provisions. Removing taxes on HSAs is an important step toward a free-market based system and controlling the costs of health care, said Andrew Welhouse, spokesperson for Senate Majority Leader Scott Fitzgerald.

“People have been clamoring for this for years,” Rep. John Nygren, R-Marinette, told Republicans on the floor.

Since 2004, federal law has allowed contributions by an individual covered by a high-deductible health insurance plan – one with $1,200 annual deductible for self-coverage or $2,400 deductible for family coverage – to go untaxed. Although HSAs in Wisconsin are not taxed federally, contributions must be totaled for state tax purposes, according to a report from the Legislative Fiscal Bureau.

The HSA bill provides a nonrefundable tax credit of 6.5 percent against Wisconsin’s individual income tax, which will be enforced by the Department of Revenue. It will cost Wisconsin close to $48 million over the next two years, according to a report from the Legislative Fiscal Bureau.

Assembly Democrats asked Republicans if there was not a better use for the money.

Citing a Fiscal Bureau study, Rep. Tamara Grigsby, D-Milwaukee, said the HSA bill would only benefit 1.3 percent of Wisconsinites.

“The thousands of people I represent, they’re trying to figure out how to put dinner on the table,” Grigsby said, “Not (thinking) about how much tax deduction they’ll get from putting money into an HSA. I hope you have a plan for the other 99 percent of the state that desperately needs help.”

Democrats said there should have been a job creation bill proposed before the HSA bill, but Republicans believe the bill is part of a larger package that, when taken as a whole, will make the business climate better in Wisconsin, according to Rep. Jim Ott, R-Mequon.

The bill will be reviewed by Walker’s office in the coming days. He is expected to sign it.