Quote Box ArchiveGo to Past Quote Boxes

Oct 30, 2008

McCain's Health Proposal is Misunderstood

The $5,000 Tax Credit Pays the Extra Tax

People have written:

I hate McCain's health plan. My family coverage provided by my employer is worth $13,000 per year, and McCain wants to fool me by giving me a tax credit of only $5,000 to go out and replace my insurance. That is an idiotic deal.

The reality:

McCain's plan does not require or encourage employers to drop their health coverage for workers. It offers a $5,000 refundable tax credit for families ($2,500 for individuals), to encourage the development of privately offered, competitive, health insurance. This would also encourage less expensive company insurance plans.

The $5,000 refundable tax credit more than covers the tax on your $13,000 company benefit. The only change for you is that you will see $13,000 more income on your W2, causing additional tax, offset by the $5,000 tax credit. Your employer has no stake in this. It doesn't change your employer's decision to offer health insurance.

The extra tax on $13,000 is $3,250 (25% rate) for a family earning $44,000. The tax is less for lower incomes. McCain's plan would provide $1,750 more than the extra tax.

Your biggest risk under any corporate health insurance is losing your job and not finding coverage. By making health insurance tax-neutral, private coverage will be encouraged to compete at lower costs.

Even better, this could be the first step toward separating health insurance from employment. Then, the coverage would belong to you, and wouldn't terminate because of changing jobs. Employers could offer you a choice: sign up for the company insurance, or take an additional $13,000 in salary. It would no longer matter to you or the employer as far as taxes are concerned. You could use the extra money to buy or continue your own health insurance, regardless of employer.

McCains's proposal is mostly tax neutral. Currently, your employer provided health insurance is not taxable to you. McCain's proposal makes it taxable to you, but gives you a credit to cover more than that tax, unless the medical plan is very expensive and you are in a high tax bracket.

Frankly, I don't support the refundable part of this. McCain actually wants to give out money if $5,000 is greater than the extra tax, which is the usual situation.

No comments :

Post a Comment

You can use the HTML tags <b> <i> and <a href="">, but not <p> or <blockquote>. Trouble commenting? Email your comment or problem to Commerce-Try at Comcast.net. Leave out the minus sign. Mention the name of the post in the email.