Monday, October 27, 2008

Almost Everyone...

The Tax Foundation's Robert Carroll has an op-ed in today's WSJ concerning the McCain health plan. Carroll emphasizes that the simple characterization of McCain's plan as taxing health care benefits neglects the fact that the plan would also include a (socialistic, according to Republicans) refundable tax credit for a married couple's health insurance spending up to $5,000. Carroll's main point can be summed up by the title of his article: "Almost Everyone Would Do Better Under The McCain Health Plan".

This is an important fact, and one I discussed here and here back in September.

While I agree with Carroll that it's distortive to focus only on the tax part of McCain's plan, I find his column today to be quite misleading. As I've discussed previously, the amount of McCain's refundable credit is indexed to the consumer price index (CPI), rather than health costs. Because health costs increase more quickly than the CPI, the real value of the McCain plan's credit will fall quickly over time. Here's what I wrote back in September:
The Tax Policy Center has just released some new estimates on this issue (for both candidates' plans). See their post for more, but here's the money quote vis-a-vis McCain's plan:
By 2014, the non-refundable portion of [McCain's] credit is worth less than the tax exclusion and, by 2018, income taxpayers pay $62 billion more in tax in the aggregate (although many middle-income taxpayers still come out ahead under the proposal).
For more, see the TPC post.
A more appropriate title of Carroll's article might have been "Almost Everyone Would Do Better Under The McCain Health Plan, Until A Few Years Have Passed, After Which Point Lots Of People Will Do Worse".

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