Know When Or Where To Go

Jill breaks out some very exciting numbers that should make every person earning a paycheck sweat. Get ready to dab:

Many of us pay the employee share of our medical premiums with pre-tax dollars so that our taxable income is lowered by the amount of our premiums. If McCain wanted to stop this practice alone, that would be bad enough. But it goes beyond that. His "health care plan" would also treat the employer share of your health insurance premium as income on which you would pay taxes.

I just received my COBRA statement from my previous employer. The premium on my health plan from said employer is just over $1100/month for family coverage. When I was employed, I paid about $300 of that per month. Under John McCain's plan, that approximately $13,000 cost of the health insurance plan would become taxable income.

Let's say you are single, and your taxable income after deductions and exemptions is $32,000/year -- not an unreasonable assumption for many working Americans who do not live in major metropolitan areas. Under John McCain's "health plan", your taxable income, if you had this insurance plan, would now be $45,000. So instead of paying about $4400 in Federal income tax in the 15% bracket (10% of the first $8025 and 15% of the rest, so his actual tax percentage is 13.75%), you would now be in the 25% bracket, and your Federal income tax liability would be $7594 (25% of the amount over $32,550 plus $4,481.25).

Now let's take a higher-paid worker with the same plan; say, someone with a taxable income of $150,000/year. He's currently paying $35,978 in Federal income tax (24% as an actual tax percentage. Under John McCain's "health plan", his taxable income is now $163,000. He just manages to squeak in under the $164,550 limit to the 28% bracket, so he isn't bumped into a higher tax bracket. His Federal income tax is now $39,618 -- a jump of $3640.

McCain's "health plan" proposes giving these workers a $2500 tax credit to "help pay for the cost of health care", which drops the tax increase on the $32,000 worker to $694. But that worker is still paying 2.1% more in taxes because the cost of the plan is now counted as part of income. For the $150,000 worker, this credit drops the tax increase to $1140 - an 0.7% tax increase.

So John McCain's "health plan" is really nothing more than a huge tax increase on the middle class. The higher your income, the less of a tax bite you receive from having your health insurance premiums counted as income.

And that's assuming your employer decides to keep providing health insurance.

This is about as important as an issue gets. I'm in a relatively secure situation and for me, this would mean choosing between health insurance and eating. I can't imagine what it would mean to retirees on fixed incomes - or worse: I can imagine. We cannot allow this to happen.

Please read the whole thing.