Bush plans to eliminate the employer sponsored health insurance tax deduct

[MSgt213]

The Bush administration is eyeing an overhaul of the tax code that would drastically cut, if not eliminate, taxes on savings and investment, but it is unlikely to try to replace the existing tax code with a single flat income tax rate or a national sales tax, according to several sources familiar with ongoing tax deliberations.

<snip>

Pamela F. Olson, a former Bush Treasury official in close contact with administration tax planners, said the president will pursue a tax system where all income -- whether from wages, dividends, capital gains or interest -- is taxed only once. That would mean eliminating taxes on dividends and capital gains paid out of fully taxed corporate profits. Most investment gains are currently taxed at 15 percent.

The administration will also push hard for large savings accounts that could shelter thousands of dollars of deposits each year from taxation on investment gains, according to White House economic advisers who have been involved with the planning. And any tax reform, according to Treasury Department officials, would likely eliminate the alternative minimum tax, a parallel income tax designed to ensure that the rich pay income taxes but one that increasingly ensnares the middle class.


Eliminating the state and local tax deduction, for example, would allow the administration to scuttle the alternative minimum tax and raise an extra $400 billion over 10 years, said Leonard E. Burman, a tax policy expert at the Urban Institute. That would be twice what the White House needs to fund the planned tax-free savings accounts, expanded retirement savings accounts and tax-free health savings accounts.

http://www.washingtonpost.com/wp-dyn/articles/A58554-2004Nov17.html

[unblock]

1. eliminating the state & local tax deduction = RAISING taxes on BLUE STATES

local taxes are obviously cities, and some of the bigger state taxes that come to mind are massachusetts, new york, hmmmm.

come to think of it, i think ohio has a hefty state tax, doesn't it?

texas still has no state income tax, so they don't lose one penny by this TAX HIKE.

personally, this will cost me literally thousands of dollars and will probably more than undo the tax cut i received from lower marginal rates.

for most high state tax residents, it will be even worse.


but then, why should i be surprised?

[VivaKerry]

2. I got a solution for bush! Let's put a scan chip in our currency....

And every piece of currency will have this scannable chip. Woops, that dollar was taxed back in 1992....it's now a tax free dolllar!!!

[papau]

3. Got to pay for ELIMINATING ALL TAX ON THE INVESTMENTS OF THE RICH

Of course the $20 you get from your savings account would also be tax free -

It is only fair

sigh....

:-)

[Robert Oak]

4. removing employer tax deduction for health

This one is major, major, major.

If they do this, it's going to be a disaster for employees to get
health insurance. That means there is zero incentive for employers
to offer it.

think about the premiums for 1 person in a group policy for a year.
Try 2k or so, multiply that by 100, 200k loss of a tax decuction.

Then state and local taxes are sometimes 12% of gross. He just increaseed the poor dramatically in being taxed.

What is WRONG with these people who voted for this psychopath?

We must get to those people and prove to them what he is really
doing for them in terms of "moral" values.

I just do not believe that 50% of America wants abortion rights
turned back to the 18th century and my conclusion is some sort of
identity thing, some sort of loyalty thing Karl Rove has managed
to tap into that we must dispell.

[Saintgermane]

5. RE: ..." We must get to those people.....

No, sadly, we must not.

What we must do is allow those who have sowed to reap.

[drm604]

10. Hell no!

Because the rest of us will have to reap the same crap whether we were responsible for sowing it or not. I will not suffer just to teach them a lesson. I NEED health insurance. We have to get through to people somehow.

[phantom power]

6. Does anybody know how this tax-credit works?

I tried to ask our HR director, and our accountant, what the implications of losing this credit would be, and basically they didn't take my question seriously.

All I really want to know are a couple basic questions like: does the tax credit reimburse all insurance expenses? A fraction? (if so, what fraction?) Is it a deduction from taxable profits, or a straight deduction from owed taxes, etc?

In other words, if businesses lose this credit, will they have to suddenly pay *all* health insurance out of pocket, or will it amount to them paying 10% more, or something in between.

[Robert Oak]

7. for self-employed

it would be 100% of a loss and a very big deal.

I believe the corporate tax code says health is written off 100%.
This is for type "C" corporation which is basically most employers.

http://advocacy.nase.org/issue_briefs/taxonhealthpremiums.asp

Yes, your horror response is correct...Bush is going to make it
financially completely impossible to get health benefits for employers
by doing this...all to give even more money to the superrich.

[phantom power]

8. Well, I'm not self-employed. I work for a small corporation of

about 25 full-time employees, plus assorted co-ops/interns.

We have the usual group health insurance and benefits package. Our health insurance is BCBS.

Are you saying it's the same situation?

[mosin]

9. The rumored proposal...

would not change employers' taxation. Employers can currently deduct wages and health insurance premiums equally. The current preference is at the employee level. Employees can exclude the value of employer-paid health insurance, but are taxed on wages. So naturally employees prefer employer-paid health insurance over cash that they use themselves to buy health insurance. The proposed change would eliminate that distinction. For self-employed individuals, it would mean the loss of the deduction for health insurance premiums.

It would be a very hard sell politically.

EDIT: I just noticed that my analysis disagrees with the linked WP article that seems to imply that the employer deduction would be eliminated. The article, however, contradicts what I've read elsewhere, and it's really hard to tell what is right when we're talking about rumors.