The McCain Tax Increase

I lost track of how many times John “Walnuts” McCain said “Let’s not raised ANYBODY’S taxes” during the second laughable excuse for a presidential debate. I realize that outright fraud gets constitutional protection when presented as political speech, but that doesn’t mean we have to believe it.

We pay federal income taxes on our “gross income.” The Internal Revenue Code currently exempts from “gross income” the value of health insurance coverage that employers provide to employees. 26 U.S.C. § 106(a). As matters now stand, those of us who receive our health insurance coverage through our employment don’t pay income tax on it. That’s a pretty big deal, seeing as how a substantial majority of Americans who have health insurance get it via employment (theirs or a family member’s).

McCain is as dishonest a little shit as you’ll ever see, so he’ll never come right out and tell you that his health care plan would eliminate the above-referenced exemption. That means the value of your employer-provided health insurance coverage would be income on which you have to pay taxes.

You could, I suppose, argue that McCain’s proposal isn’t an according-to-Hoyle “tax increase” since the marginal rates don’t actually go up. That, of course, is dishonesty of McCainish proportions. The truth is that your taxable income will make a big jump, meaning you’ll pay substantially more in taxes, without any corresponding increase in actual income to soften the blow.

McCain wants to replace the income exemption with a refundable tax credit, $2,500 for an individual and $5,000 for a family, that you can use to buy health care coverage. Your choice under the McCain plan is keeping your employer-provided coverage, shouldering the additional tax liability, or dropping that coverage and using your tax credit money to buy insurance coverage in the Free Market (praise its holy name).

Not surprisingly, both options appear to be big fat losers for consumers. The most recent Kaiser Family Foundation survey reveals that the average annual total cost of employer-provided health insurance plans for a single worker is $4,479 for an individual and $12,106 for a family. Of those amounts the employer pays $3,785 and $8,824 respectively.

A married couple with income between $63,000 and $128,000 per year will incur an additional $2,206 in federal income tax liability (25% marginal rate x $8,824). Of course, it’ll be worse if the artificial increase in your taxable income bumps you up to a higher marginal rate.

“But,” you say, “what about that $5,000 tax credit? Doesn’t that leave you ahead of the game?” Damned if I know, and the McCain campaign is being way too coy for my liking.

Here the campaign says that the tax credit is strictly for purchasing insurance. Also, “[f]amilies will be able to choose the insurance provider that suits them best and the money would be sent directly to the insurance provider.” (Emphasis added.) If the taxpayer gets a great deal on insurance and ends up spending less than the tax credit amount, he can deposit the unused portion of the credit into a health savings account.

In response to Obama campaign criticism, the McCainiacs added a new page to their website and now say that “[f]amilies can use this credit to purchase insurance of their choice, including keeping their current coverage.” That statement, along with the chart further down the page, suggests that you can keep your current coverage, use the tax credit to pay the additional tax liability, and simply pocket the extra money. Yet the original statement about the money being sent directly from the feds to the insurance company is still there!

McCain had plenty of opportunities to clear up these ambiguities during the second debate. Did he? No. Never once did he come right out and say that your tax credit can be used to pay the additional tax liability his plan would create.

Those who find themselves without employer-provided health insurance will find themselves stuck shouldering the entire cost of purchasing coverage themselves. The guy who wants family coverage he used to get through work now has to pay the $8,824 once paid by his employer. The government will send a $5,000 check “directly to the insurance provider.”  The employee will have to find a way to pay the additional $3,824 himself.

Except that it’ll be a lot more than $3,824 if he wants to keep the same level of coverage he has now. The $12,106 the employer was paying is a group rate. The employee ain’t gettin’ no goddamn group rate; he’s going to pay a lot more for the same product than his employer did.

McCain’s answer is that once we free up the nongroup insurance market from all those pesky state regulations, the invisible hand will provide innovative new solutions for consumers. I have no doubt that we’d see premium wars in the nongroup market if McCain’s plan becomes reality, but we’d also see corresponding drops in the quality of coverage. Sure, you can get a family health insurance policy for $5,000, but the coverage won’t kick in until you’ve spent, say, $20,000 of your own money.

And let’s not even think about the increase in policy-based exclusions. Insurance regulation is a quintessential matter of state concern, but McCain would largely do away with that via federal legislation. So much for state’s rights, eh? And the notion that insurers won’t include a whole big bunch of currently illegal exclusions in their policies sheer free market falderal. The idiotic notion of “rational market behavior” doesn’t hold true in the real world. Never has, and there’s no reason to think it ever will.

Domestic policy McCainiac-in-Chief Douglas Holtz-Eakin says the McCain plan will “put 25 to 30 million individuals out of the ranks of the uninsured, into the ranks of the insured.” This will come as a huge surprise, I’m sure, but that’s bullshit. A group of health care economists writing for the journal Health Affairs reports that we’d see a decrease of about 1 million in the number of uninsureds during the first year of the McCain plan’s existence. Twenty million will lose their employer-provided health coverage, but approximately 21 million will purchase coverage with the tax credit. Of course, the coverage won’t be as good as what they had before, but hey, numbers is numbers!

Even those largely illusory gains begin disappearing soon. The tax credit stays the same, but medical inflation continues to drive up health care costs and insurance premiums along with them. It won’t be long before your half-assed, cut-rate health insurance becomes simply half-assed and you can’t afford it anymore.

So, then, who’s the candidate who wants to impose a huge tax increase on working people? John McCain, that’s who.

Who’s the wild-eyed radical who wants to dismantle completely the way we provide health insurance coverage in this country? John McCain, that’s who.

John McCain: Wrong for America.

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