Editor’s note: Molly Ivins is taking a break from her column while undergoing cancer treatment.
The president has finally found a tax increase he likes – on workers’ “gold-plated” health benefits. The new-found tax revenues would supposedly offset the cost of helping Americans buy their own coverage. This weird plan won’t go anywhere politically – even though elements of it have merit.
The tax system can’t fix the health system. Bush has this idea that fiddling with the tax code will meet most every social need. It won’t, and that goes double in the very complex world of health care.
Employer-provided health insurance is now entirely tax-exempt. Coverage bought outside the job is not. Bush’s proposal, mentioned in his State of the Union Address, would do the following:
Workplace health coverage costing more than $15,000 for a family or $7,500 for an individual would be subject to income and payroll taxes. Families that buy their own policies, meanwhile, could deduct $15,000 from taxable income. Individuals could take off $7,500. It doesn’t matter if the actual cost of the insurance is less.
The idea is being sold as a way to help the 47 million uninsured Americans buy coverage. Not many are buying.
“It’s totally unclear as to how these benefits would be reprogrammed to help the uninsured,” Fitzhugh Mullan, a former U.S. assistant surgeon general, said over the phone.
The uninsured are mostly the working poor, who don’t earn enough to use tax deductions. The proposal does nothing for those who can’t get insurance because a family member is already sick. Private insurers shun even well-to-do people with pre-existing conditions.
The deduction would be a boon to the 27 million Americans who already buy health insurance outside of the workplace – and a matter of fairness. As Bush correctly noted, it would “level the playing field” for people who obtain coverage outside the job.
No doubt there are people with good incomes who haven’t bothered to buy health insurance and would do so with an attractive tax incentive. But let’s be clear about one thing: This tax deduction is more about helping real-estate agents and freelance consultants than dishwashers.
However, placing some limit on the tax subsidy for health insurance makes sense, says Mullan, now a professor of health policy and pediatrics at George Washington University.
“We’re going to have to design ways in which the individuals with more luxurious or extensive health benefits are not receiving those at public expense,” he says. “If you want to buy a Lexus, you can buy a Lexus, but you have to have a bank account to do it.”
But this is a minor point. The big negative in Bush’s health-care policy, Mullan contends, is that it doesn’t address the big stuff – “The crazy-quilt of insurance carriers, government coverage, complexity and waste in the system.”
In his weekend radio address, Bush likened this proposed tax treatment of health insurance to that of home ownership. Just as Americans can deduct interest payments on home mortgages, he said, they would deduct premium payments on health insurance.
It’s an awkward choice of analogy in that there’s almost no cap on the deductibility of mortgage interest. You can deduct all the interest paid on a $1 million mortgage, whether it bought a McMansion, a beach house or both.
Economists argue that allowing generous deductions for mega-mortgages raises the price of housing – just as tax subsidies for fancy health coverage increase medical costs. But while Bush has ignored their calls to curb the subsidy for luxury residences, he’s perfectly happy to jump on the autoworkers’ spiffy health benefits.
“Of all the tax breaks for all the interests in all of America,” the workers must be thinking, “and you had to come into mine.”