I think, overall, that Bush’s health insurance deductibility plan is a good move to make competition enter the field. But it may end up raising taxes for some.
Right now, the cost of health insurance isn’t taxable to employees. Under the new plan, everything your employer pays for you will become taxable income. People whose employer pays over $15,000 per year for family health insurance will be taxed on the amount above $15,000.
My question is – and I haven’t seen it answered but I’m sure the answer will be “yes” – is: this means employees will have to pay Social Security taxes on this amount too, right?
When someone making $25,000 with health insurance gets a “$12,000″ raise that is “deductible” and still has to pay out @ 15% or $1800 per year for Social Security, that’s not going to seem like much of a tax break!
That will make Social Security slightly more solvent if possible and hasten the day when politicians are forced to repeal the Alternative Minimum Tax.
The point is that when this happens, insurance companies will have an incentive of offering plans that fit within the deduction limits and still be profitable to them and provide the coverage for the customer.
And customers will have the incentive to use health savings accounts and take responsibility for their own health care to some degree.
But when I think about biting that bullet, I ask myself “Why do you go to a private doctor instead of the public health clinic?” It’s worth it. Government run health care is only good if you’re a member of Congress. For everyone else, it’s a bit Third World. I’ve sat in waiting rooms for hours with homeless people writhing in pain from kidney stones hoping to get “served”. I don’t want every trip to the doctor to be that way.
The only way to make it fair though is if our legislators on Capital Hill feel the bite too. They usually exempt themselves from the legislation we the serfs must endure.
You can read more on this here.
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