Tim Carney explains McCain’s health care plan and the politics behind it:
Barack Obama attacks John McCain’s health care plan as spurring the “unraveling of the employer-based health care system.” Big employers are siding with Obama.
Not surprisingly, employers want employees more dependent on them. Of course they don’t want it to become more affordable for you to strike out on your own. Sure, “unraveling” the employer-based health care system” is a bad thing for employers, but it might also be good for everyone else.
The core of McCain’s healthcare plan is shifting federal tax breaks regarding health insurance. Currently, health insurance fits into a special class of employer benefit—not only does your company get to deduct every dime it spends on your health insurance (as with all wages and benefits), but you don’t get taxed on the value of that benefit you receive.
So, consider the money your employer contributes to your insurance premium. If your employer instead used that money to give you a raise—you would pay taxes on the raise. If your employer gave you some other benefit (say, in-house daycare or a company car) you would have to report at least some of the value of that benefit to the IRS, and pay income taxes just as if your boss had given you a check. Health insurance gets special treatment as a benefit.
McCain would end the special treatment of employer-based health insurance, and replace it with a broad tax benefit for all health insurance purchases, whether through your boss or on your own. Your company health insurance would become a taxable benefit, adding thousands of dollars to your taxable income, but McCain would give you a $5,000 tax credit—not just a deduction, which would lower your taxes by only a few hundred dollars, but a credit, which reduces your total tax bill by $5,000. In fact, it would be a “refundable” tax credit, meaning you would get a $5,000 benefit even if your taxes were below $5,000 (which sounds kind of like welfare to me).
Read the rest here at dcExaminer.com.
(via Michael Cannon at Cato.)
