January 25, 2007
Illustration of the President's Health Care Tax Initiative
For media inquires please email Brian Phillips or call 202.464.5102.
WASHINGTON, D.C. - The Tax Foundation has completed a new Fiscal Fact analyzing the impact of President Bush's recently proposed Health Care Tax Initiative. The report illustrates how the plan would affect four different types of families.
The report looks at hypothetical families with different demographic characteristics--marital status, income, and number of children--and calculates the tax consequences for each family. For example, a family of four with two children that earns $80,000 per year in wage and salary income and receives $10,000 in employer-provided health insurance would see $1,500 in tax savings. However, the same family with $20,000 in employer-provided health insurance would see a tax increase of $1,500.
The President's plan subtracts the standard health insurance deduction from the payroll base, as opposed to deducting it only from adjusted gross income (AGI), where most deductions and exemptions occur. Doing so allows a portion of the 53 percent of uninsured Americans who pay no federal income taxes to benefit, at least in the short run, from the deduction. However, this has generated concern that the resulting loss in Social Security taxes will mean a loss in Social Security benefits at retirement.
Tax Savings Based on the Characteristics of Four Different Cases
Type | Tax Hike | Tax Savings |
Family of Four Earning $80,000 in Wage and Salary Income and Receiving $10,000 in Employer-Provided Health Insurance |
| $1,500 |
Family of Four Earning $80,000 in Wage and Salary Income and Receiving $20,000 in Employer-Provided Health Insurance | $1,500 |
|
Single Mother with Two Children (Head of Household), Earning $25,000 in Wage and Salary Income, Uninsured but Purchasing Health Insurance |
| $2,250 |
Single Man with No Children, $50,000 in Wage and Salary Income, Uninsured but Purchasing Health Insurance |
| $3,000 |
Click here for the full report.
See also: President to Propose Large Tax Deduction to Spur Health Insurance Purchases
See also: The Economics of Taxes and Health Insurance
For media inquires please email Brian Phillips or call 202.464.5102.
