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Reason Foundation

Biden's Unhealthy Scare Tactics

Shikha Dalmia
October 2, 2008, 6:37am

The truth squad has pointed out a number of – oh, how should one put it? -- factual flubs by the two Veep candidates during their debate. For instance, Biden claimed that McCaesar voted against the Bosnia intervention whereas he (McCaesar) – surprise, surprise -- voted for it. Palin, meanwhile, claimed that Obama's health care plan would "mandate" coverage for everyone whereas it actually relies on hefty government bribes – er, subsidies – to achieve universal care. But the bigger prevarication on this issue – that for some reason the New York Times, ABC News and other media truth-squaders have missed!! -- was not by Palin but Biden who totally mischaracterized the McCain health care plan -- one of the few bright spots in McCain's otherwise daft domestic agenda with all its saber-rattling against Wall Street "greed." McCain is planning to extend refundable tax credits to individuals ($2,500) and families ($5,000) to encourage them to buy health care. But Biden claimed that McCain would pay for these credits by taxing people who currently get their health coverage from employers. "He taxes as income every one of you out there, every one of you listening who has a health care plan through your employer. ... And then you're going to have to replace ... the average cost of the plan. ... You're going to have to replace a $12,000 plan with a $5,000 check you just give to the insurance company. I call that the 'Ultimate Bridge to Nowhere,' " Biden thundered. Good line – but as divorced from the truth as Christie Brinkley is from David Cook. Here is how the McCain plan will work, as I understand it: Currently, employers can deduct the health insurance they purchase for their employees from their federal taxes. However, Uncle Sam won't offer individuals who buy their own health insurance the same deduction. This means that self-employed or unemployed folks – the people least able to afford health care -- have to purchase their coverage with their after-tax dollars, something that makes it prohibitively expensive and so many of them simply choose to forego it, one big reason behind America's high uninsured rates. McCain's plan will change that. He will end the tax deduction for employers and, instead, extend a tax credit to individuals. Ending the deduction to employers would mean that they would stop buying your health care – and presumably give you that money in the form of higher wages to purchase your own coverage. Because those wages would be taxed, Biden claims that your health care benefits would be taxed. In other words, suppose your employer currently spends $10,000 to buy you family coverage. But with the end of health care deduction, he'll stop buying your coverage and hand you that $10,000. And suppose you are among those richest Americans who pays the highest 37% or so tax rate. That means that you would lose $3,700 of your extra wages to Uncle Sam and, say, another $500 or so in additional state and other taxes. That means that you will have about $5,500 left plus the $5,000 tax credit for a total of $10,500 extra in your pocket to buy coverage for your family. Is that a bad deal for you? Only if you think that the government can spend your money better than you can. McCain is scary on many counts, but on health care, Obama's tax-and-spend policies are far scarier. For more on the McCain health plan, click here: http://www.ncpa.org/pub/ba/ba629/

Shikha Dalmia is Senior Analyst


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