Explain it to me like I'm a first grader: McCain taxing health care benefits

[mrreowwr_kittty]

So say I'm a single person (I am) who gets employer provided health care. I pay $600 a year for my share of the premium and my employer picks up the remaining $2400. These are just hypothetical figures. McCain says I get a credit of up to $2500 a year as an individual. So does this mean I get a tax credit on the $600 and have to pay taxes on my employer's share? In this case, it would seem that my overall tax bill wouldn't go up at all, and may even go down a bit since I get the tax credit and my employer's contribution to my insurance wouldn't bump me into a higher tax bracket. But I could see where someone with a family, where the employer contribution is much larger, might be shafted since the tax credit is $5000 for a family.

One thing opponents of his plan say is that it will discourage employers from providing insurance. Why is this so? Is it because people will be getting tax credits?

[Rabrrrrrr]

1. I think the best way to look at it is to just assume that McCain is lying,

and that whatever he says won't come to pass anyway; that he probably hasn't put any thought into it to begin with and has no idea what he's fucking talking about, or, if he does know, he's just pandering for votes and lying about it to begin with.

[gateley]

3. Good point. nt

[gateley]

2. I can do this, because Biden explained it to us.

If you make $50,000/year, and your employer's contribution to your health care coverage is $12,000/year, you will pay federal income tax on$62,000/year. The value of your employer's contribution is added to your gross income.

[mrreowwr_kittty]

5. Yeah, but do you get a tax credit on the portion you pay?

Most employees pay at least part of their premiums.

I'm not defending McCain's plan at all BTW. I'm for single payer universal health care, all the way.

[gateley]

21. No -- sorry, I'm like the other DUer - I think it's bullshit. Others here have

explained it, and bottom line is, it doesn't help us at all.

[doc03]

47. The way I understand it is you only

get a tax credit if you opt out of your employers plan and get one on your own. The idea is to encourage employers to drop health coverage. The problem I see is they say the average employer pays $12000 a year for group health insurance. If an employer pays $12000 for a group plan how can an individual expect to get insurance for only $5000. Then what if you have a pre-existing health problem where are you going to get insurance?

[NotThisTime]

26. This is right & my Husbands Union is PISSED - they're all voting Obama

To answer your question, why this discourages companies from offering health insurance, I think this is the unspoken truth. You get a credit of 5K if you don't have insurance, what incentive does any business have to then supply you with insurance? John McCain says the credit is for you to make your own choices and pick your own insurance company, HOWEVER, anyone with a pre-existing condition will be SOL if their company no longer offers it, because nobody will pick them up.

[jazzjunkysue]

41. How can that NOT be "increasing taxes?"

He keeps insisting he'll lower taxes, while saying he'll taxe me more.

How stupid do I have to be to know that increasing taxes is not lowering taxes?

[electron_blue]

4. Yes, and this gets even more ludicrous when you look at situations where

employees overall health benefits are $10-$12K/year, which is the case for me. That is a significant bump to your taxable salary under the McCain plan. We'll definitely be shafted.

[Indenturedebtor]

6. Ok like you were a firstgrader then. Ahem:

If a Republican says anything about helping anyone who makes less than 4 million dollars a year, simply substitute "help" with "aggressively touch your bathing suit area".

Now remember: Whenever any creepy old man talks about touching your bathing suit area - kick him in his twig and berries.

[lumberjack_jeff]

12. ROFL! n/t

[mrreowwr_kittty]

15. ROFLMAO!

[KathieG]

25. LOL

:rofl:

[windbreeze]

32. an unexpected ROFLMAO this morning....n/t

[Misskittycat]

35. Good one.

[Hutzpa]

36. You've become my best buddy for the day

bwahahahaha!!!

:rofl:

[uponit7771]

39. +1 LOFL!!!! POTD

[Muttocracy]

7. as for the employers, I think the employers no longer get a tax break for providing health ins.

so they wouldn't have an incentive to do so. And if the employers don't provide group plans, it's more expensive for individuals to get their own health ins. plans (not to mention pre-existing conditions nightmare).

that's my impression.

[blondeatlast]

11. THAT'S the killer right there. Employers desperately want to drop health care, it's easily

the most expensive benefit they offer.

This gives them the excuse.

It's just WAY bad news all around.

[mrreowwr_kittty]

16. But how can they do that?

That would mean that the money is taxed on both ends. So essentially you'd be going from a situation where employers get a tax write off and employees a tax free benefit to double taxation!

[ladywnch]

45. employers also pay taxes on employee wages. they pay .0751% social security tax

on taxable wages so if the health insurance benefit is taxed the employer pays additional taxes too....in addition to the benefit. so it becomes too costly for them to provide it.

[abumbyanyothername]

8. McCain's Plan Explained

1) Whatever insurance your employer pays for is taxable income to you. If your insurance costs your employer $2,500/year you have additional AGI of $2,500. If your insurance costs your employer $7,500/year you have additional AGI of $7,500. If your insurance costs your employer $12,500/year you have additional AGI of $12,500.

2) You get a tax credit of $2,500/year to offset the cost of health insurance.

The purpose of the plan is to motivate employers and employees away from employer-provided health coverage in favor of employee-purchased coverage, but it provides no coverage for the employee and essentially shifts the cost to the employee.

Needless to say, it is a very bad plan.

[mrreowwr_kittty]

18. But doesn't that also entail a shift from group plans to more expensive individual ones?

Jesus, what a disaster for people with big families or pre-existing conditions!

[subterranean]

24. Yes, it does. That's why it's a bad plan.

[NotThisTime]

28. Exactly...

[roseBudd]

9. A big issue is the indexing of the tax credit, health care rises faster so over time the benefit

decreases

[alcibiades_mystery]

10. The average family insurance bill is closer to $12,000

Sometimes, the hypothetical matters.

Without the tax exemption, employers will dump health care coverage and force people on to the market to pay at the individual and family level. The market doesn't have the same non-discrimination requirements as employer health care plans, very obviously (and this is a condition of the tax exemption in the first place). More people will therefore fall into the uninsured category.

See the following PDF for a complete description:

http://thinkprogress.org/wonkroom/wp-content/uploads/2008/07/health_taxes21.pdf

For the economic arguments Mccain is relying on to produce the plan, see:

http://content.healthaffairs.org/cgi/content/full/hlthaff.w4.106v1/DC1

(Notice that even the writers of this piece, who would presumably support Mccain's plan, must provide the counterargument as a qualification, and it is a counterargument that McCain's plan doesn't take into account).

[Muttocracy]

13. maybe this article, which summarizes an article about McCain's plan, will help?

http://thecaucus.blogs.nytimes.com/2008/09/16/journal-disputes-mccains-health-care-claims/

[Muttocracy]

19. here's the direct link to that article

http://content.healthaffairs.org/cgi/content/full/hlthaff.27.6.w472/DC1

[Yavin4]

14. McCain Wants To End Employer-Based Healthcare

And move to individuals buying health insurance like they buy car insurance. Good luck negotiating with the Aetnas of the world when you have kids and one of them has a chronic health condition.

On the bright side, faith healing will still remain free.

[blondeatlast]

17. Senator McCain is a bad person who doesn't want you to have a lollipop.

Senator McCain will tax the people whom Mommy And Daddy work for for giving them nice things like you getting a lollipop after a check up.

This will cost the people Mommy and Daddy work for a lot more than what they already pay which is too much already. So the people Mommy and Daddy work for might no longer give then that nice thing.

That means that Mommy and Daddy have to get help to get your check-up and lollipop from big, greedy companies that will make Mommy and Daddy pay a lot more.

If the people Mommy and Daddy work for allow all the Mommies and Daddies to keep this nice thing, Senator McCain will tax Mommy and Daddy a whole lot more for it.

Bad Senator McCain.

[Muttocracy]

20. =)

[sandnsea]

22. Magic Words: UP TO

Which has always meant NOTHING for those making less than $30,000 a year, and next to nothing for those making less than $60,000.

[subterranean]

23. Using your example...

If you pay $600 a year and the employer picks up the remaining $2400, you would have to pay tax on that $2400 as if it were regular income. You would get NO tax credit for the $600.

Under McCain's proposal, you could avoid that tax by opting out of your employer's plan and purchasing insurance on your own. In that case, you would get a tax credit of $2500 to offset the premiums. Of course, the type of plan you could afford as an individual would likely be much less comprehensive than the one you get through your employer. If you're young and healthy, and can afford to pay for your own insurance, that might be OK.

As I understand it, McCain's plan is designed not so much to discourage employers from providing insurance as to encourage individuals to buy their own insurance instead.

[mrreowwr_kittty]

29. So I don't get the tax credit at all for the part I pay?

Where can I find a link that says that? I want to do a post on my blog about this and I want to make sure I'm linking to the correct info. McCain's website doesn't explain how this works.

[subterranean]

37. Here are a couple of links I found:

http://www.alternet.org/healthwellness/93734/mccain's_health_care_plan:_gut_employer-based_insurance/

An excerpt:

Given this history, it was hardly surprising when John McCain made the attack on employer-provided insurance his health-care centerpiece. He would eliminate the tax exclusion workers get for health benefits their employers provide; in other words, he would require workers to pay income taxes on the value of their health insurance, while companies would still get to deduct the costs for providing that coverage. In its place, McCain would offer families a tax credit of $5000 -- and individuals a credit of $2500 -- to buy their own insurance. (They'd get the credit even if they didn't pay taxes.)

And another article by NY Times columnist Bob Herbert:

http://www.alternet.org/healthwellness/99239/mccain-palin_health_plan_relies_on_the_very_marketplace_strategy_that%27s_crippling_our_economy/

P.S. I noticed that post #31 above also provides an excerpt from McCain's own website.

[fed_up_mother]

30. Right. And the hell to folks with pre-existing conditions.

[TheCoxwain]

27. McPlan IS A DANGEROUS POISON PILL ... Here is why

Joe Six pack figures that he is healthy and does not need insurance ...and he can do without the extra tax and loves the Tax credit that he will get no matter what .. So he opts out of his office plan ... over time the office health care costs will go up ... and some employer will reduce/not provide coverage .. and individuals will be more at the mercy of Insurance companies...


Think of this a way to dismantle the collective bargaining that a workplace insurance provides WRT to insurers.


McCain Plan is an EVIL, DISGUSTING , COLD & CALCULATED move towards making the insurance companies more profitable .. while another 40 million people ( Often the sickest) will be without coverage and will be driven towards bankruptcy.

Whosoever thought of this plan will surely burn in hell ( If hell does exist.)

[OmahaBlueDog]

42. This plan is the absolutely stupidest part of a stupid campaign

1. It panders to the "personal responsibility" crowd. These are the people in the GOP who believe that anything done for the common good that is not private is evil, including things like roads, municipal utilities, police, fire departments, etc.

2. The plan appeals to small businesses who complain that they cannot afford to compete with large businesses for employees because they cannot afford to offer healthcare.

3. The argument behind the argument is that what many who favor this approach advocae is the use of HSAs and the purchase of high deductible, major medical policies. This is bad at so many levels I don't even know where to start. The main downside I see is that, like people on Medicaid in many states, this approach will discourage regular medical checkups and preventitive maintenance in favor of waiting until they're really badly ill, and then have to visit an ER. As stated upthread, the practical result will' be that young workers will decide that this is an expense they can skip, and this will drive up everyone elses costs (rightys take the argument that health care would be plenty cheap if we just made couples pay for birthing kids, and excluded all those fat and sick people).

Unlike many here, I don't favor single payer, because I don't think a one-size-fits-all approach works well in anything, and I do think the private sector does certain things right with health care. For example, would Universal Single Payer pay for chiropractic? Would it pay for aromatherapy? Would it pay for accupuncture? Would it be structured like an HMO with PCPs managing care? Would you get to choose your doctor? Would you get some kind of cost savings if you don't care who your doctor is? Would single payer pay for gym membership? Do you get some kind of incentive for being a non smoker with a low BMI? Bottom line -- there will/would be a lot of disagreement over what "universal" really means.

I'd like to see 3 things:

1. For-profit health insurance is eliminated in favor of "Mutuals". "Mutuals" are insured-owned, and return "profit"in the form of capital credits, or reinvest it to cover losses in coming years. People could choose companies with the services, physycians, and(within a certain range) costs they want.
2. The federal government would regulate (in conjunction with states) and reinsure the mutuals
3. Employers could provide insurance and take the tax deduction on 100% of paid premium. If employers choose not to provide insurance, they'd pay an additional payroll tax and employees would pay 100% tax deductible premiums on a sliding scale based on income, dependents covered, and plan chosen. Everyone gets insured for basic doctor visits, checkups, scheduled preventitive exams (e.g. colonoscopies), maternity, vaccinations, and hospitlization even if they are broke and collecting unemployment.

Is my plan perfecct. Nope. Every approach has shortcomings.

[bluethruandthru]

31. In addition to making you pay taxes on your employer-provided

premiums (as if it were income)...McCain generously offers a $2,500 subsidy for individuals and $5,000 for families. Sounds good until you realize that the subsidy will be paid DIRECTLY to your insurance company!!
You won't get a nice check each year...your insurance company will.

This is directly from McCain's website:

"John McCain Will Reform The Tax Code To Offer More Choices Beyond Employer-Based Health Insurance Coverage. While still having the option of employer-based coverage, every family will receive a direct refundable tax credit - effectively cash - of $2,500 for individuals and $5,000 for families to offset the cost of insurance. Families will be able to choose the insurance provider that suits them best and the money would be sent directly to the insurance provider. Those obtaining innovative insurance that costs less than the credit can deposit the remainder in expanded Health Savings Accounts."

[Born_A_Truman]

34. Yes, I figured he was pushing HSAs.

Does his website also say he will tax employee provided benifits?

Reagan did this when he was president. My company car was taxed as income at the end of the year.

[bluethruandthru]

46. yep...

Taxing those benefits is how he will pay for that generous subsidy ....to your insurance company.
It's amazing! He taxes us and gives the money to the insurance companies!!

[City Lights]

33. IIRC, his tax credits only apply to those buying private health insurance.

If you have health insurance through your employer, the portion your employer pays will be considered taxable income.

[Born_A_Truman]

38. Links

McCain's web site. I don't see where he discloses that he plans to start taxing employer health benefits. If you do, please post.
http://www.johnmccain.com/Informing/Issues/19ba2f1c-c03f-4ac2-8cd5-5cf2edb527cf.htm

NY Times article
http://www.nytimes.com/2008/05/01/us/politics/01mccain.html

To end the disadvantage to those who do not buy insurance through employers, Mr. McCain proposes to eliminate the exclusion of health benefits from taxable income. In exchange, he would provide refundable tax credits of $2,500 to single people and of $5,000 to families, with the goal of stoking competition in the individual insurance market. The elimination of the exclusion would generate $3.6 trillion over 10 years, according to the McCain campaign, and that money would pay for the tax credits.

[Orsino]

40. Okay. "First of all, Mr. President, 'Brazilian' is not a number..." n/t

[gblady]

43. Kicking butt....

and taking names...
GOBAMA!

[gblady]

44. ooooops....

wrong thread...but still true!