Democrat Barack Obama came out as the frontrunner in the national race for president after three weeks of frightening developments on Wall Street and a massive federal bailout. Obama, though, cannot afford to sit back and cruise to Nov. 4 and expect to win. What’s a guy to do? Talk about an increasingly desperate Philadelphia Eagles season? Critique the direction rock band The Killers have headed down with their new electronica CD?
No. Instead, let’s get the people talking around their watercoolers about health care! Dynamite!
Obama’s hitting Republican John McCain now on McCain’s health care plan, specifically targeting how McCain plans to tax employer-provided health care benefits. Yes, it’s true, but that’s only half the story, and we’ll get to the second half in a minute. First, what McCain is proposing is this: The money spent by your employer to provide you health care will be considered part of your income. So if you make $40,000 a year and your employer spends $5,000 to provide health care insurance for your family, your taxable income goes up to $45,000. Right now, you pay taxes only on the $40,000. Increasing your income level increases how much you pay in taxes.
Now, before hyperventilation sets in, here’s the second half of McCain’s plan. He’s calling for a tax credit worth $2,500 for an individual and $5,000 for a family if you go out and buy your health care insurance in the private market.
The non-partisan Tax Policy Center says in the short-term, McCain’s plan results in a net tax cut for nearly every American between now and 2018. However, the plan notes that unless the tax credit is adjusted to keep up with the ever skyrocketing cost of health care, eventually the cost of insurance will supercede the tax credit.
Instinct says the McCain camp has listened to a lot of employers from the mom-and-pop store to the giants like Wal Mart which say providing health insurance for employees is expensive and curbing profits, thus taking away from investing and job creation. This plan seems like a way to stop employer-provided health care coverage, put millions of new customers into the private market, and then new and current providers of health insurance will create an ever-increasingly competitive pool. Competition = lower costs for consumers.
A couple of things I wonder about is whether this tax on health care benefits impacts public employees like teachers and police officers. We also know when companies and municipalities band together to buy health insurance coverage, their premiums are lower than if they tried to purchase coverage individually. If an estimated 20 million people lose their employer-provided health care benefits (Source: CNN) and are forced as individuals to find coverage, would it really be cheaper than if they bought coverage as part of a 100-employee, 500-employee, 100,000-employee company?
In the end, though, here’s something to consider. If McCain is elected, there’s a better-than-average chance he’s going to face steep Democratic majorities in the Senate and House, so the opportunity to actually implement this plan will be incredibly difficult if not impossible.
