Setting the Record Straight on Healthcare

Candidates stretch the truth in campaign ads all the time, but Obama’s fearmongering on McCain’s healthcare plan stretch more than the waistband of Michael Moore’s underwear.

Obama ads say McCain’s plan would tax employer paid benefits, and make it sound like it’s a tax increase. But McCain’s plan will not – I repeat, will not – result in a net increase in income taxes due to employer paid health insurance. In the vast majority of cases, the McCain’s healthcare credit will far exceed the taxation on employer benefits.

Do the math. If you have a healthcare plan for your family paid by your employer worth $12,000 and the employer pays the entire cost – the taxes on this benefit might be a high as $4,200 – if you are in the 35% tax bracket. Net benefit to this taxpayer is $800. No tax increase. A more likely scenario would be a taxpayer in the 15% bracket – the increase in tax of $1,800 is more than offset by the $5,000 credit for a net decrease in taxes of $3,200.

Obama’s ads are fundamentally dishonest because they exclude the tax credit for healthcare under McCain’s plan. You are far more likely to pay less in taxes under McCain’s plan.

There’s more information here and here at the Tax Foundation website.

The chart below is from the Tax Foundation.

Does it look like McCain is sticking it to the poor? Not according to the Tax Foundation. Their conclusion about McCain’s healthcare plan?

Health care costs and tax policy are major preoccupations of the American people, and that is reflected in the proposals of the presidential candidates. Senator McCain’s tax credit approach to health insurance would give every citizen a powerful incentive to purchase health insurance: $2,500 (individual coverage) or $5,000 (family coverage), no matter what the cost of the insurance. Moreover, it reduces systemic biases in our health care system that have contributed to high cost growth. The improved efficiency that should result from the McCain credit, combined with a powerful incentive to purchase health insurance and a beneficial effect for low-income people, would seem to make this policy particularly attractive to both sides of the political spectrum. Few government programs kill two birds with one stone, but the McCain health credit seems to be one that could.

One more thing. There are a number of tax calculators online that purport to show you what you would pay in income tax under the plans proposed by the candidates. Which ones can you trust? Simple. If it doesn’t ask you whether you have health insurance, it’s a crock. Why? Because most of us do have insurance. If the calculation doesn’t include McCain’s refundable tax credit for health insurance, it is misleading, to say the least.


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