"Rudy" suggests tax deduction for healthcare costs

This proposal is to equalize the tax situation for two groups. Today a worker gets his healthcare insurance via tax deductible dollars via his/her employer. A private individual today must spend after tax dollars to get health care insurance.

Making healthcare insurance costs tax deductible fixes this inequity while making health insurance more affordable to all. It doesn't totally solve all problems, but it does help.

JeffD

 

Right now the "tax" on my wages for healthcare is 25% of my income. I'd rather they just raise the federal taxes, say 15% and provide me single payer healthcare. Any 'tax credit' or 'above the line' deduction will not help the poor one wit. All any healthcare tax benefit only benefits the middle and upper classes.

Universal healthcare with an option for 'private policies' layered on top of (not in replace of) the universal is the way to go.

 

<div class='quotetop'>QUOTE(Pinto Girl @ Aug 3 2007, 02:45 PM) [snapback]490095[/snapback]</div>

My comments on this from the decision under the thread entitled Universal Healthcare:

"It looks like his plan is to provide up to a $15,000 tax exception per family for those that purchase health insurance. He also advocates eliminating employee provided health insurance. So now everyone has to purchase their own health insurance but they get a tax exemption. The problem with this is that he is proposing a tax exemption not a tax credit. So if you do not pay $15,000 in taxes you do not get the full amount. Considering that the poor and middle class in this country pay very little in federal income taxes and no where close to $15,000 per year, what he is proposing is that the government will in effect pay for the health insurance of the wealthy and not the poor. Sounds like a winning plan to me and I will lose my company provided health care too. Yes, that sounds like a Republican plan to me.

This sounds like the mortgage interest deduction all over again. It is a huge windfall for those with large expensive houses and big mortgage payments. However, if your are a lower or middle class person that purchases a modest house for say $100k to $150K, you will never come close to paying enough interest to beat the standard deduction. Again a big windfall for the wealthy and nothing for the lower classes."

What I don't get is the disconnect between the ideas and the proposals. Everyone claims that they want to make healthcare more affordable and available for everyone. Gulliani's plan does a little bit of the first part by making healthcare more affordable. However, this is on a sliding scale where the more money a person makes, the more the federal government will contribute towards their healthcare. Not a plan that very many would call fair or good use of the federal taxpayers dollar.

For example, take a hypothetical family of 4 that only takes the standard deduction therefore paying the maximum in federal taxes possible.

If they make $23,700 or less they get absolutely no benefit from this plan at all. Before you say no one makes that little, 2 people working minimum wage make a combined $21,424 per year.

If they make the median income for the US, $44,334, then they will get a benefit of $2,354. That's nice but nowhere near enough money to pay for health insurance especially now that they don't get it from their employers anymore.

If they make $111,250 than they will max out Gulliani's tax break and get the full $15,000. However, I doubt they were having a hard time paying for health insurance to begin with.

I don't see how this plan will do anything to increase the number of people with health insurance.

BTW, Gulliani's stand right now might be Family = Man + Woman but his record as Mayor of New York doesn't back that up. He's talking a good talk now because he is running for the Republican nomination and has to try to pacify the bible-thumpers.

 

Tax deductions in and of themselves favor the wealthy over the middle or lower classes. A wealthy taxpayer that reaches the 35% tax rate will get a 35% of his health insurance costs rebated to him. A middle class taxpayer that is in the 25% tax bracket will have 25% of his health insurance costs rebated, and a lower income taxpayer will have 10% of his health insurance costs rebated to him, and the poor who doesn't pay income taxes get 0% of his health insurance costs rebated to him. The rich gets the most subsidy and the poor gets the least. That is why republicans love tax deductions. The same system is in place with the above the line tuition deduction and student loan interest deductions which subsidizes the educations of the wealthy more than the poor. Unfortunately, republicans spin it with such a smile that joe bob thinks he is getting a tax break, when he gets none whatsoever.

The only real solution to making a fair and equal access health care system is a single payer, government provided service. The only problem is that the wealthy have a lot of money in making sure that most americans don't get healthcare (but they also have a lot of money making sure americans pay a ton for a lot of drugs they might not need). The system is set up against healthcare, and the power and money is in the status quo.

 

<div class='quotetop'>QUOTE(MarkMN @ Aug 3 2007, 03:13 PM) [snapback]490186[/snapback]</div>

Probably not. He would get zapped with the AMT, and won't be able to take the tax deduction at all. And, most tax deductions and credits are phased out with higher income levels, above $100,000 per household or so, as are tax credits. But there's a bigger problem with Rudy's plan.

I think Rudy's plan is a non-starter because it doesn't address the need to help the people between the "poor" who have access to state medicare-type of coverage and the middle class that work in jobs without health care benefits. People with household incomes of $35,000 would owe about 12% of their income in income tax (quick estimate using 10% of the first $7,550 in income, and 15% of the amount between $7,550 and their actual income ... you don't get out of the 15% tax rate until you cross $60k). That's about $4,200. But that family has exemptions and possible deductions and credits that will bring that tax liability down, and probably below the $3,000 they would have to spend for the most basic coverage.

They do pay a huge tax that everyone forgets in these discussions, the Social Security tax, which is really a 17% tax on the first and every dollar they earn (adding employer and employee contributions). No deductions on this one either.

The other factor that comes into play are those that choose to "gamble" and not have health insurance. I had an employee at my last job who did just that, every other year. She spent less on health care than her premiums would have been ... and she was only paying 25% of the cost of the insurance. She negotiated with doctors for lower rates when she had to have something done, and got huge, huge discounts (in one case, she paid 10% of the cost I did for a crown). Some percentage of the "uninsured" are uninsured by choice, and I suspect the people between 18 and 35 who refuse medical coverage at work fall into this category. A less expensive, "catastrophic" insurance might be the ticket for these people.