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In his radio address on Saturday , President Bush momentarily broke ranks with tax cutting and launched a proposal for a new tax he plans to introduce in his State of the Union on Tuesday. Unfortunately, he couldn't have picked a worse way to change course.
In a time when all hands—employers, organized labor, politicians—are worrying about how to cover the uninsured and underinsured and curb health care costs, the president wants to tax employees in order to make it less appealing for their employers to provide health insurance benefits.
To be sure, he began his address with a familiar rallying cry. The nation needs to attack the problem of rising health-care costs to enable more Americans to pay for rudimentary health insurance, he said, "without creating a new Federal entitlement program or raising taxes." So how to explain the justification for his plan to tax what he called "overly expensive, gold-plated plans?"
As it turns out, those plans aren't so gilded--they're simply the decent benefits that employers provide to many of the country's workers. Bush's proposal, which he didn't spell out but which The New York Times (free registration required) later made clear, "would cap the amount of benefits that can remain tax free at $15,000 for a family and $7,500 for an individual. Anyone whose health insurance cost more than that would pay taxes on the difference. For example, a family with coverage costing $16,000 a year would pay taxes on $1,000."
By suggesting the cap—which he hopes will pay for a tax cut to move the uninsured to buy health insurance—the president was rushing in where angels fear to tread. The happy arrangement of providing tax subsidies to both employers and employees to keep the nation's employer-provided benefits system rolling has been hugely popular with both Corporate America and organized labor.
It's not for nothing that past attempts to derail this mutually beneficial system have failed. Luckily, President Bush's attempt to monkey with the tax code in an attempt to overturn the employer-provided health benefits system seems sure to meet a similar fate.
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