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Bush Calls For Tax-Code Reform To Ease Healthcare Costs January 20, 2007

Posted by notapundit in Politics, US News, White House.
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WASHINGTON (Dow Jones)–Previewing a major new domestic-policy initiative, President George W. Bush said he wants to change the U.S. tax code to bring private health insurance within reach of more Americans.

“Rising health care costs are making insurance too expensive for millions of our citizens,” Bush said Saturday in his weekly radio address. To remedy the situation without hiking taxes or creating a new entitlement program, he says the tax code can be rewritten to treat health insurance more like home ownership.

“The current tax code encourages home ownership by allowing you to deduct the interest on your mortgage from your taxes,” Bush said. “We can reform the tax code, so that it provides a similar incentive for you to buy health insurance.”

Healthcare is just behind Iraq among the public’s concerns, according to polls, and Bush will use Tuesday’s State of the Union address to lay out the administration’s plans to ease the burden of escalating costs. Much of its agenda isn’t new: the White House wants expand the use of health savings accounts, which allow users to pay for routine medical care on a pre-tax basis, allow small businesses to pool insurance plans, and pass medical liability reform.

But the changes Bush previewed in his radio address are a new wrinkle, designed to make it easier for people to buy private health insurance, rather then rely on employer-provided plans. The current system, Bush says, encourages workers to pick overpriced, “gold-plated” insurance plans that bump up insurance premiums on others and force them out of the system.

Bush didn’t outline the nuts and bolts of his tax-code proposal, but it is expected to include capping some taxpayers’ ability to exclude employer-based healthcare benefits from their income, subjecting them to federal income tax. Savings could go toward tax credits for lower-income people who buy health insurance or for state insurance pools.

Altering the tax benefits for employer-provided health care involve far-reaching changes to the tax code affecting millions of taxpayers and companies. Bush’s Advisory Panel on Federal Tax Reform proposed in November 2005 to limit the tax benefit for employer-provided health care to $11,500 for families and $5,000 for singles. The recommendation, which has languished with the tax panel’s other reform proposals, came after witnesses told the tax panel the existing federal tax subsidies for health insurance were benefiting rich workers while raising insurance prices for the poor and increasing the number of uninsured.

According to the Advisory Panel on Federal Tax Reform, tax benefits associated with health care will cost approximately $141 billion, or 12% of all federal income tax revenue, in 2006. The largest component of this cost is the employee exclusion for employer-provided health insurance and medical care, a tax expenditure of $126 billion.

Bush’s healthcare proposal will inject him into a debate that is heating up in a number of state capitols. Most recently, California Governor Arnold Schwarzenegger announced a $12 billion plan to require uninsured Californians to carry insurance. Bush said he will support governors’ attempts to make insurance more accessible and will announce next week a new effort to help states lower the number of people without private health insurance.

“Health insurance should be available, it should be affordable, and it should put you and your doctor in charge of your medical decisions,” Bush said Saturday. “I look forward to working with Congress to pass the initiatives that I lay out next week, so we can help millions more Americans enjoy better care, new choices, and healthier lives.”

By Henry J. Pulizzi, Dow Jones Newswires

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