NCPA - National Center for Policy Analysis


July 24, 2007

There is a way to build on the strengths of our private health care system while addressing its shortcomings.  And it starts with addressing one of the root causes of the problems in health care -- the federal tax code, says Allan B. Hubbard, assistant to the president for economic policy and director of the National Economic Council.

The problem is straightforward:

  • Under today's tax code, people who are fortunate enough to get health insurance through their jobs get a big tax break -- but those who have to buy coverage on their own get no tax break at all.
  • This skewing of the tax code makes it impossible for millions of Americans who work for small businesses or who are self-employed to afford health insurance and it drives up the cost of coverage for us all.

So President Bush has proposed to level the playing field for health insurance:

  • Under his plan, every family with private health coverage would receive a standard tax deduction of $15,000 -- no matter where they get their health insurance.
  • This deduction would encourage more people to buy their own health insurance, just like the mortgage interest deduction encourages more people to buy their own homes.
  • Some have suggested that a flat tax credit could also achieve the president's goal of leveling the playing field and he has signaled that he would be open to that option.

These tax reforms are simple, but their effect would be revolutionary:

  • More than 100 million people who are now covered by employer-provided insurance would see lower tax bills right away.
  • Those who now purchase health insurance on their own would get a tax benefit for the first time.
  • And millions of others who have no health insurance would be able to purchase private coverage.

Source: Allan B. Hubbard, "A Tax Cure for Health Care," Wall Street Journal, July 24, 2007.

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