Dubya says 'maybe' to health care tax credit

The prez said yesterday that he might be willing to support a $5,000 federal health care tax credit for families covered by private insurance.

A couple of months ago, in his State of the Union address, Dubya proposed a health care standard deduction of $15,000 for families and $7,500 for individuals who purchase their own medical policies. The administration says the deduction "would level the playing field" with workers who receive a tax benefit for health care coverage by their employers.

But at a June 27 briefing, called to discuss pending legislation on the State Children's Health Insurance Program (S-CHIP), Dubya said, "Now I recognize some [health care experts] believe a tax credit for health insurance would be a better way to do so. For example, some have proposed a tax credit of $5,000 for every family with private coverage. This would have a similar outcome as the standard deduction I proposed, and I'm open to further discussions about these two options."

Whether by deduction or credit, Dubya continued, "reforming the tax code would have a major impact on American health care. ... [J]ust as tax incentives for home ownership have encouraged more Americans to buy homes through the private housing market, new incentives for health insurance would lead more Americans to buy coverage through the private health insurance market. And that's what we want. That ought to be the goal of this country."

Good or bad deduction? Of course, there's a lot of debate on the existing mortgage interest deduction, too. Back in November 2005, the president's own blue ribbon panel on tax reform suggested that we get rid of this treasured homeowner tax break, characterizing it as a generous tax subsidy that encourages over-investment in housing at the expense of other areas of the economy.

You can find more reasons the President’s Advisory Panel on Tax Reform opposes the mortgage interest deduction in this earlier blog posting.

By unceremoniously tabling any action on the tax panel's recommendations, Dubya signaled his support for tax status quo, at least as far as popular tax breaks.

But when it comes to health care, argues the administration, reform of the tax code would "help more than 100 million people who are now covered by employer-provided insurance reduce their tax bills. Those who now purchase health insurance on their own would save money on their taxes for the first time."

Even better, contends the White House, "as many as 20 million others who have no health insurance would purchase basic coverage."

Regardless of your political position, here's one presidential statement that even Michael Moore can agree with: "America's health care is too costly, it's too confusing; it leaves too many people uninsured."

Here's hoping a palatable remedy can be prescribed before it's too late for everyone.

Now about that children's health care program: The S-CHIP program is designed to help provide low-cost health care coverage to qualifying families with children.

S-CHIP is jointly financed by the federal and state governments. It is administered, however, by the states, each of which determines the design of its program, eligibility groups, benefit packages and payment levels for coverage.

Senate Finance Committee Chair Max Baucus, D-Mont., has proposed $50 billion over five years for S-CHIP reauthorization and expansion, funded partially through tobacco taxes. Supporters of the increase say the added money is necessary to cover the greater number of children eligible for S-CHIP benefits.

The White House is not among those supporters.

In his remarks Wednesday, the president said additional S-CHIP funds would go beyond the program's original intent to provide health care coverage for poor children and could conceivably extend government coverage to children of families earning as much as $80,000 a year.

As with the deliberations on the overall role of government in everyone's health care coverage, we'll just have to watch and see how the Capitol Hill debate on this particular sector plays out.

Comments

[Steve Austin]

Wanted to thank you for keeping the people updated on the health care tax deduction / tax credit issue.

Happen to agree with your previously-stated preference to decouple health insurance from the workplace. When people make arrangements for themselves, the result is more often than not better than when the employer or the government makes the arrangements.

These tax deductions / tax credits are one way to make it happen. Another way would be to just slightly lower taxes across the board in a "revenue-neutral" fashion relative to what is being proposed via deductions / credits. And still make employer-provided health insurance a taxable benefit. Then people would have more take-home money to Do It Themselves. (And if they spend that little windfall on something other than health care, there will be no one left to blame.)