HEALTH REFORM: Republicans Plan Tax-Incentive Bill
Today's New York Times reports that "House Republican leaders are drafting an election-year bill that would create new tax breaks to help people who receive no health benefits from their employers in buying health insurance." House Ways and Means Committee Chair Bill Archer (R-TX) is "working closely" with House Speaker Newt Gingrich (R-GA) on the bill, which would also include "tax incentives for small business owners to buy health insurance for themselves and their dependents." Republican sources said the plan's cost "would be more -- perhaps substantially more -- than $10 billion over five years." But Republicans plan to cover the cost by using "revenue raised from higher cigarette taxes, saying they would try to impose such taxes ... even if Congress could not agree on comprehensive tobacco legislation this year." Archer said, "As Congress moves forward to prevent teen smoking, one of my top priorities will be to return the revenue raised to the American people for health-related tax relief." The Times notes that the GOP plan comes at a time when 41 million Americans "lack health insurance." While small businesses "are creating most of the nation's new jobs," they "are much less likely than big businesses to provide health benefits to employees."
Points Of The Plan
According to the Times, the GOP bill would offer "tax deductions for the cost of any health insurance" workers buy for themselves and their dependents that their employers do not provide. In addition, small business owners would "be able to take a larger deduction than they now receive for their health insurance costs." Currently, small business owners can deduct 45% of the "amounts they spend on health insurance for themselves and their dependents" -- a level that is now scheduled to rise to 100% by 2007. The bill, however, "would speed up the changes, increasing the tax deduction for more than three million small business owners." The GOP bill would lower the threshold for a medical expense tax deduction from the current 7.5% of adjusted gross income "to 5% or 2.5%," and taxpayers would be able to "count the cost of prescription drugs, doctors' services, hospital care, eyeglasses and other items not reimbursed by insurance." The Times further reports that the GOP bill includes tax breaks "for insurance to cover the costs of long-term care including nursing homes ... regardless of a person's age, so people could presumably buy the insurance earlier, at a lower cost." House Republicans also said their bill would "include a new tax credit to stimulate research and breakthroughs in medical science."
Opinion And Little Opposition
The Times reports that White House health policy aide Chris Jennings "welcomed Republican interest in an issue that has preoccupied Mr. Clinton for years." Jennings said, "Any member of Congress who suggests ways to expand health insurance coverage should be commended. But how do you make sure that changes in the tax code increase the number of people with insurance, rather than just providing benefits to those who already have coverage? The individual health insurance market does not work very well. You'll need significant market reform and further regulation to assure affordable coverage." Susan Jacksack, a tax analyst at CCH Inc., said, "Many people would welcome the proposed deduction for individual health insurance premiums. On the other hand, you could argue that people would buy excessively generous insurance policies. If the government subsidizes something, you are likely to get more of it." Overall, the Times reports, the "political outlook for the Republican proposals appears favorable," since "[m]any Democrats, including Mr. Clinton, have supported more generous tax deductions for the health insurance costs of self-employed individuals" (Pear, 3/30).