"Commentary"-Healthcare & Taxes Can Work Together
Monday, February 12, 2007SUSIE GHARIB: Tonight's commentator says Democrats in Congress should use the president's latest proposals on health insurance as a starting point. She's Alice Rivlin, economist at the Brookings Institution and former vice chair of the Federal Reserve.
ALICE RIVLIN, ECONOMIST, BROOKINGS INSTITUTION: The president's bold proposal to change the tax treatment of health insurance would make the tax code fairer and might discourage some wasteful spending. If the Democrats work with the president to broaden the proposal, they could also cover millions of the uninsured. The president proposes taxing employers' contributions to employee health insurance and allowing a deduction for health premiums of $15,000 per family.
It would no longer be advantageous to ask the boss for health insurance rather than a wage increase. Both would be taxed equally. Workers without employer health insurance would no longer be at a disadvantage. They would get the same tax deduction as the guys in the big firm. People with high-cost employer health plans would pay more taxes -- yes, that's a tax increase -- but generous plans encourage excessive health spending. The Democrats could trash the president's proposal on the grounds that deductions won't help low-income people who don't pay much income tax.
Alternatively, they could welcome the president's opening bid and turn the deduction into a refundable tax credit for everyone. They would also have to create insurance policies that moderate earners can afford. Then we would have a fairer health insurance system that covered a lot more people. Go for it, Democrats. I'm Alice Rivlin.
