Just came across an older article (April) on McCain's health care proposal. Apparently he didn't think that through entirely, because it'd be a significant
tax increase on everyone who currently gets insurance through their employer.
Health Insurance benefits would become taxable with a tax credit offered in return: $2,500 for individuals, $5,000 for families. This is the average cost for health insurance:
(edit: Don't know if the image shows up or not, seems to be there only half the time. Check the link below for the source)
So you'd get on average an extra ~$9,000 "income" with a family, but McCain's tax credit is only $5,000 per family. You end up paying taxes on $4,000 more than what you do now. Individuals would get a $2,500 tax credit, but on average receive almost $4,000 from their employer - an extra $1,500 that would be taxed.
Economists for Obama: McCain's Health Care Plan Quote:
In 2007, for a family the average total premium for a health care plan was $12,106, with $8824 paid by the employer. Let's say the McCain plan is enacted. What would happen to that average family if the employer continued to provide coverage (Scenario 1)? For a married couple filing jointly with income $63K-128K, the marginal tax rate is 25%, so they would face a tax increase of $2406 (25% of $8824).
But of course the intent of the McCain plan is to kill the employer-provided system. So let's say the McCain program is adopted and your employer drops your family's coverage (Scenario 2). What would happen? You would now have to foot the complete $12,106 bill for coverage, a $8825 increase over the employee-portion you're currently paying. This would be offset by a $5000 tax credit. So net, you would end up paying $3325 ($8825-$5000) more for your health care.
So, remarkably, McCain has managed to design a heads-you-lose, tails-you-lose program. Either your employer keeps your coverage, in which case you face a huge tax increase. Or your employer drops your coverage, and you face an even more massive increase in your out-of-pocket health-care costs.
The best-case scenario would be that employers who dropped coverage would then increase wages, compensating workers for the jump in what they have to pay for health care. In the long-run, there's a fair case to be made that this would happen, but as Keynes famously remarked, "In the long run, we're all dead," and the transition period would be extremely painful.
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Why has this never been brought up before? You'd think this would have come up once or twice...