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Bush Will Propose Raising Taxes in the SOTU Message

Old 01-20-07, 05:55 PM
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Bush Will Propose Raising Taxes in the SOTU Message

http://news.yahoo.com/s/ap/20070120/ap_on_go_pr_wh/bush

By DEB RIECHMANN, Associated Press Writer

President Bush will propose a tax deduction of $7,500 for individuals and $15,000 for families regardless of whether they buy their own health insurance or receive medical coverage at work.

The proposal, to be announced Tuesday in his State of the Union address, is aimed at giving the uninsured an incentive to purchase a medical plan. It also is designed to encourage those with generous plans to either embrace cheaper insurance or pay taxes on the part that exceeds the deduction, a Bush administration official familiar with the proposals said Saturday.

If passed by Congress, the proposal would be the first time that workers could get a tax break if they bought their own insurance. But it also would be the first time that some employer-provided health care benefits could be taxed. Health care benefits provided by companies are currently exempt from income and payroll taxes.

In his nationally televised speech, Bush also will announce steps to take some federal money now going to hospitals and other facilities and give it to states for programs to reduce the number of uninsured people.

The cost of health care is growing more than two times faster than wages, making it harder for families to buy insurance and for employers to sponsor a health benefit for workers, Bush said Saturday in his weekly radio address.

"Our challenge is clear: We must address these rising costs, so that more Americans can afford basic health insurance," Bush said. "And we need to do it without creating a new federal entitlement program or raising taxes."

Further details of the two proposals were to be announced in the State of the Union address.

"The tax code unfairly penalizes people who do not get health insurance through their job," Bush said.

House Ways and Means Committee Chairman Charles Rangel (news, bio, voting record), D-N.Y., is not embracing the idea.

"This is a dangerous policy that ultimately shifts cost and risk from employers to employees and could result in a higher number of uninsured," Rangel said. "The new, Democratic majority in Congress is interested in relieving, not increasing, working families' tax burden."

But another senior administration official notes that the deduction is higher than the cost of an average policy for families, which currently is estimated at $11,500.

Because of this, about 80 percent of people with employer-based plans will actually see their tax liability fall because their insurance policies cost less than the deduction, he said.

Both officials spoke on condition of anonymity because they did not want to pre-empt the president's speech.

There are an estimated 46 million to 48 million people in the United States who are uninsured at some point during the year.

"Most of the uninsured are people who are working and they've got a little bit too high of income to qualify for Medicaid or other government programs. If they buy health insurance they have to pay for it entirely out of their own pocket," Mark McClellan, former administrator for the Centers for Medicare and Medicaid Services and former commissioner of the Food and Drug Administration, said in a telephone interview. "This would be a significant amount of new help for them."

Bush also wants to redirect federal dollars that hospitals and other institutions get to help cover costs for caring for the uninsured. With this money, states would set up programs to assist people in getting health coverage and help people with high-cost health conditions.

Several states are working to reduce the number of people living without health insurance.

California Gov. Arnold Schwarzenegger, for instance, has announced a plan that would cost $12 billion a year to extend health care coverage to most of the state's 6.5 million uninsured. That would make it the second state, after Massachusetts, to require everyone to carry insurance.

Hospital administrators are worried about what the president's plan will mean for their facilities. They fear they will get fewer dollars when they treat Medicare patients. They say federal reimbursements already fail to cover costs.
______________

Tax increase and a bonus for the health insurance industry

Last edited by classicman2; 01-20-07 at 05:57 PM.
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Old 01-20-07, 06:01 PM
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Yeah, ok. Sounds like a scam to me. Whenever Bush opens his mouth, I pretty much assume it's bad for most Americans.

What's next? Well, I can see Bush announcing Americans can save thousands of dollars every year if they purchase hospital supplies directly from companies and conduct surgery on their families themselves. No Emergency Room medical bills, and no waiting lines.

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Old 01-20-07, 06:26 PM
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I don't really like the idea of adding even more big tax deductions. I know they have their benefits but it is mostly adding even more complexity to the tax, insurance, and healthcare systems.

Here's an idea - how about lowering tax rates across the board and letting people decide exactly how to use the savings from them rather than the government playing around with deduction numbers and offering 'incentives' to buy insurance.
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Old 01-20-07, 06:35 PM
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I think I missed the part where Bush is raising taxes. Could you go back and bold it?

Normally raising deductions decreases taxes (unless the dreaded AMT sneaks up behind you and bites you in the ass, while you are not looking.)
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Old 01-20-07, 06:40 PM
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Originally Posted by OldDude
I think I missed the part where Bush is raising taxes. Could you go back and bold it?

Normally raising deductions decreases taxes (unless the dreaded AMT sneaks up behind you and bites you in the ass, while you are not looking.)
EDIT: Oops. Read that wrong. You pay taxes on the amount going over the deductions which "encourages" you to get cheaper health care. But it looks like they're proposing to tax that benefit now (if you work for a company) and just return it at a later date, meaning the government then gets free money from the interest. But I don't understand why, if one chose not to get health insurance, then he/she couldn't just get some really crappy bottom of the barrel cheap insurance and then take that $7500. You get to deduct that whether or not you use the standard deduction, right?

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Old 01-20-07, 08:06 PM
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Originally Posted by OldDude
I think I missed the part where Bush is raising taxes. Could you go back and bold it?

Normally raising deductions decreases taxes (unless the dreaded AMT sneaks up behind you and bites you in the ass, while you are not looking.)
Currently, if you pay some or all of your own health insurance premiums through a payroll deduction from your paycheck, that deduction is paid with pre-tax dollars -- that is, you don't pay taxes on the money you use to buy healh insurance.

However, if you buy your own health insurance, you can only deduct it 1) if they itemize, and 2) to the extent the amount they spend on healthcare (including health insurance premiums) exceeds 7.5% of their income.

Under the new Bush plan, everyone will be able to deduct their health insurance premiums, regardless of whether they pay through their employer or not but only $7,500 ($15,000 if you're married). The good news is, you get to take the $7,500 even if your health insurance costs less than that. The bad news is, you're out of luck if your health insurance costs more than that.

What this means is that a single tax payer who pays more than $7,500 in health-insurance premiums but pays through payroll deductions (or a joint filer who pays more than $15,000) will see his taxes go up, since he excess over $7,500/$15,000 will no longer be deductible. The article suggests that roughly 20% of people with employer-based plans will see their taxes go up due to this.

This will also have the effect of lowering people's weekly take-home pay (for those people who pay their health-insurance premium through a payroll deduction). If you pay $100 a week in insurance premiums and are at a 25% marginal rate, your weekly paycheck will be $25 lower (but you'll get that $1300 back when you get your tax refund check the next year).
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Old 01-20-07, 08:08 PM
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Originally Posted by OldDude
I think I missed the part where Bush is raising taxes. Could you go back and bold it?

Normally raising deductions decreases taxes (unless the dreaded AMT sneaks up behind you and bites you in the ass, while you are not looking.)
Take your Republican blinders off, and I believe you can see it.
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Old 01-20-07, 08:13 PM
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don't they already have FSA and HSA?
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Old 01-20-07, 08:13 PM
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Originally Posted by JasonF

Under the new Bush plan, everyone will be able to deduct their health insurance premiums, regardless of whether they pay through their employer or not but only $7,500 ($15,000 if you're married). The good news is, you get to take the $7,500 even if your health insurance costs less than that. The bad news is, you're out of luck if your health insurance costs more than that.

I pay about $80/month in premiums, so that's roughly $1000 per year. I'll be able to deduct $7500? That can't be right, can it?
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Old 01-20-07, 08:14 PM
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average policy for families, which currently is estimated at $11,500.
Does anyone here really have a policy that expensive?
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Old 01-20-07, 08:16 PM
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Well there have been folks on this forum that have said in the past that you can buy comprehensive health insurance for $50.00 per month. That's more ridiculous than the $11,500 per year figure.
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Old 01-20-07, 08:32 PM
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Originally Posted by classicman2
Take your Republican blinders off, and I believe you can see it.
I prefer using my "poor boy" blinders. I'm retired, my employer has capped medical benefits so I pay any increases over employer's cap with taxed dollars. Thats my situation right now, and I don't care about all these hypothetical situations for people with super, fanatastic great plans.

Under the Bush plan, the rest of the insurance I pay will be deductible. Woot!
I'm a poor victimized retiree and I'll pay less because of the wonderful Bush tax deduction. ONly some Democrats want me to pay the difference with taxed dollars. Well, fuck them, that's why I never voted for one.

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Old 01-20-07, 08:34 PM
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Originally Posted by al_bundy
don't they already have FSA and HSA?
Yes how would it work if you are paying into an HSA?

I love how unclear this is worded to the untrained among us.
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Old 01-20-07, 08:59 PM
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Originally Posted by Red Dog
I pay about $80/month in premiums, so that's roughly $1000 per year. I'll be able to deduct $7500? That can't be right, can it?
Yeah I am confused. I pay no premium. My wife pays about $40 a month, IIRC.

What does this mean for us? A $15,000 deduction we didn't have before?

Sounds too good to be true. But if it is- my oh my that would be lovely.
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Old 01-20-07, 09:01 PM
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Or will the full premium cost (what the coverage actually costs per year) get counted as income now, and then deducted at tax time?
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Old 01-20-07, 09:06 PM
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Originally Posted by Red Dog
I pay about $80/month in premiums, so that's roughly $1000 per year. I'll be able to deduct $7500? That can't be right, can it?
Based on this sentence:
Because of this, about 80 percent of people with employer-based plans will actually see their tax liability fall because their insurance policies cost less than the deduction, he said.
I read it to mean you'll get the full $7,500. It does seem strange. Maybe they'll start counting employer contributions as taxable income.
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Old 01-20-07, 09:49 PM
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Originally Posted by OldDude
I think I missed the part where Bush is raising taxes.

Oops! I used the wrong handle when I started this thread!
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Old 01-20-07, 10:06 PM
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Originally Posted by Ranger
Does anyone here really have a policy that expensive?
I know a guy who pays around $450 a month for health insurance for him and his family of two, so it wouldn't surprise me. I told him if he quit his current job and actually went with a competing company, he would make less, but would still MAKE more in the end because the company has a much better healthcare option.
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Old 01-20-07, 10:10 PM
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Originally Posted by OldDude
I think I missed the part where Bush is raising taxes. Could you go back and bold it?

Normally raising deductions decreases taxes (unless the dreaded AMT sneaks up behind you and bites you in the ass, while you are not looking.)
It's a poorly written article.
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Old 01-21-07, 12:03 AM
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Originally Posted by DVD Polizei
I know a guy who pays around $450 a month for health insurance for him and his family of two, so it wouldn't surprise me. I told him if he quit his current job and actually went with a competing company, he would make less, but would still MAKE more in the end because the company has a much better healthcare option.

he probably has a plan where he can pick any doctor out of network. my company has a plan like that too and one that is a lot cheaper where you only go to in network doctors.

waste of money unless the doctors you go to are top notch in their field like being a professor at a top medica school. or your kid has cancer and the top notch cancer center in your area is out of network
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Old 01-21-07, 01:17 AM
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Originally Posted by Red Dog
I pay about $80/month in premiums, so that's roughly $1000 per year. I'll be able to deduct $7500? That can't be right, can it?
My wife is a school teacher, and last year our out of pocket was still over $600 a month.

The total premium range for what we could get now is $850 to $1,200 per month before the state kicks in part, which is now up around $600 per month. The amount your company kicks in is probably taxed now as a benefit.

I do need to figure out what that will mean in terms of having a corporation pay for ones medical bills (not insurance). I wonder if that is still an expense to the company that isn't taxed.

But, if this is a tax increase, it looks like the easiest one to swallow I have ever seen.
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Old 01-21-07, 08:29 AM
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If I propose to change the tax code to count as taxable income some benefit that was previously not counted as taxable income in the tax code - have I, in effect, raised taxes on some?

If your answer is no - I don't want to hear you complain that the House Democrats raised taxes on the oil companies.
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Old 01-21-07, 08:51 AM
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Originally Posted by classicman2
If I propose to change the tax code to count as taxable income some benefit that was previously not counted as taxable income in the tax code - have I, in effect, raised taxes on some?
If you ONLY do that, you have raised taxes. If you make the same taxable income ALSO an allowable deduction, the answer becomes "maybe." If the allowable deduction is larger than than the income then the answer is "NO, it's a tax DECREASE."

I don't think this is a clear-cut tax increase. However, I have questions and it bears watching to make sure the pols don't screw it up.

*The benefit will become taxable for all time once the precedent is established. The pols giveth and taketh away on deductions as whimsy or need for higher taxes strike them. Rules for deducting medical expense used to be more liberal. If the income is taxable, will they guarentee NEVER to renege on the deductibility?

*Will it be indexed for either general inflation or medical costs. If not, the taxable income aspect will eventually override the effect of the deduction.

*Will it be a deduction item under AMT. AMT disallows most deductions and becomes a nearly flat tax (26% and 28% rates) on all your income over an exemption. It is increasingly biting in the ass middle-class Americans who have considerable deductions under the regular tax system. Again, they may make it taxable income, LIE about it being deductible, and NAIL you under AMT, where it isn't deductible.

So if we don't watch the bastards carefully, it could turn into a tax increase, but it is not obvious on the face or from your article.
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Old 01-21-07, 10:45 AM
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I'm still not understanding the $15,000 deduction. That's a crazy benefit for someone like me...our out-of-pocket for healthcare is sure as shit nowhere close to $15 g's a year. This can't be right.
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Old 01-21-07, 10:54 AM
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I think the share the employer pays will be treated as taxable income, but then also allowed as a deduction (up to max.) My (former) employer had cafeteria plans; he paid the cheapest, you paid the difference for a better plan. So we knew total cost and our cost (if we read the materials).
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