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Bush Reiterates Need For Tax Reforms In Healthcare

by Mike Godfrey, Tax-News.com, Washington

27 February 2007


US President George W. Bush has reiterated his belief that reform of the tax code is needed to encourage a higher take-up of private health insurance among the American population.

"Today we have a big problem with our tax code: If you buy health insurance on your own, you do not get the same tax advantages as people who get their health insurance through their jobs. When it comes to health care, everyone should get the same tax breaks," Bush stated during his weekly radio address.

He went on to add:

"So I proposed a standard tax deduction for health insurance that would be like the standard deduction for dependants. This common-sense solution will level the playing field for all Americans, whether you get your health insurance through your job or on your own."

"My proposal would provide the same deduction for all Americans who buy health insurance, whether they get it through their job or on their own. That is fair, and it's the right thing to do."

Under Bush's proposals, families with health insurance will not pay income or payroll taxes on the first $15,000 in compensation, while singles will not pay these taxes on the first $7,500 of their income. At the same time, health insurance would be considered taxable income. This is a change for those who now have health insurance through their jobs. It is said that this measure would result in lower taxes for about 80% of employer-provided policies. The remainder with more generous polices will have the option to adjust their compensation to receive lower premiums and higher wages, in order to offset the tax change.

However, the President's plans have drawn fire from Democrats, who now control Congress, casting some doubt on whether his proposals will emerge in the form of new legislation. Rep. Pete Stark (D-CA), Chairman of the Ways and Means Health Subcommittee, has argued that the plan would hurt middle-income Americans, because employers will shift even more cost and risk to their employees. "Under the guise of tax breaks, the President is pursuing a policy designed to destroy the employer-based health care system through which 160 million people receive coverage," he suggested.

Stark has argued that Medicare is better placed to provide low cost and stable healthcare coverage to low income and elderly patients than private healthcare coverage, and has indicated that he would oppose Bush's plan in committee.

"President Bush's proposal will make a bad problem worse. I do not intend to consider this particular health care proposal in the Ways and Means Health Subcommittee," he announced last month.


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