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McCain wants to Tax your Benefits; up to 20 million may lose company-paid healthcare

The McCain camp consistently and incorrectly talks up how Senator Obama will raise taxes on everyone making over $42,000 a year.  That’s wrong of course, and in side-by-side comparisions of the Obama Tax Plan vs. McCain’s, the typical American benefits much more from the Obama Plan.  Be sure to look at the chart in the WaPo story and see how it applies to you.  Or jump to the next page to see the chart.

What the Arizona geezer hasn’t come out and said is that he plans to raise taxes too.  While not calling it a Tax increase, the McCain plan would start taxing the value of your company-paid healthcare.  And while the plans call for giving taxpayers a healthcare tax credit, experts says its not nearly enough to offset the higher tax and would diminish the value of shared healthcare plans as younger (healthier) workers opt out of the system leaving older (less healthly, more expensive) workers with less choice and more expensive plans delivering less service.

The New York Times says this option could force as many as 20 million Americans to lose their healthcare benefits.  From the story:

A study coming out Tuesday from scholars at Columbia, Harvard, Purdue and Michigan projects that 20 million Americans who have employment-based health insurance would lose it under the McCain plan.

There is nothing secret about Senator McCain’s far-reaching proposals, but they haven’t gotten much attention because the chatter in this campaign has mostly been about nonsense — lipstick, celebrities and “Drill, baby, drill!”

For starters, the McCain health plan would treat employer-paid health benefits as income that employees would have to pay taxes on.

The study was published yesterday on the website Health Affairs.  The study’s abstract says:

Senator John McCain’s (R-AZ) health plan would eliminate the current tax exclusion of employer payments for health coverage, replace the exclusion with a refundable tax credit for those who purchase coverage, and encourage Americans to move to a national market for nongroup insurance. Middle-range estimates suggest that initially this change will have little impact on the number of uninsured people, although within five years this number will likely grow as the value of the tax credit falls relative to rising health care costs. Moving toward a relatively unregulated nongroup market will tend to raise costs, reduce the generosity of benefits, and leave people with fewer consumer protections. [Health Affairs 27, no. 6 (2008): w472-w481 (published online 16 September 2008; 10.1377/ hlthaff.27.6.w472)]

The Summary reads:

Achieving Senator McCain’s vision would radically transform the U.S. health insurance system. His plan would alter the nature, source, and financing of coverage for the nearly 160 million Americans who now receive health insurance through their employers. We estimate that twenty million Americans–about one in every eight people with job-based coverage–would lose their current coverage as a result of the change in the tax treatment of coverage. Initially, this loss of job-based coverage would be offset by an increase in coverage in the nongroup market (although not necessarily for the same individuals). Within five years, however, the net effect of the plan is expected to be a net reduction in coverage relative to what would have been observed if the tax treatment of employer-sponsored coverage remains as it is now. The decline of job-based coverage would force millions of Americans into the weakest segment of the private insurance system–the nongroup market–where cost sharing is high and covered services are limited. Senator McCain’s proposal to deregulate this market would mean that people in it would lose protections they now have. These changes would diminish the security of coverage for most Americans, especially those who are not–or someday will not be–in perfect health.

McCain vs. Obama - Taxes