Richard Burr would like to address one of the fundamental problems in our health care system, but a news story on his bill last Friday had a confusing description (ruining a good first pass) and stirred up misdirected anger. Burr would eliminate the second largest giveaway in the federal tax code–the income tax exemption for individuals whose insurance coverage paid by one’s employer–and replace it with refundable tax credits of up to $5,400 for a family that purchases insurance. This does not do anything to the costs or incentives for the employers. As a cost of doing business, the amount a company spends on insurance for its employees will still be untaxed. Critics, however, were quick to accuse Burr of trying to destroy the willingness of employers to provide insurance to their employees. I think the Senator did a good job of refuting them in his press release:
One of my greatest fears is that continuing high health care costs will force companies to dump their employee health care plans and millions of Americans and their families will be left without health care insurance. We must prevent this dangerous scenario by giving individuals control over their health care so they do not have to rely on their employers or the government for their health care. The ?Every American Insured Health Act? does just that,? Burr said. ?Personal freedom means owning your own health care without the fear of losing your job, your employer taking your insurance away, or being forced into a government-run health care plan. We encourage all Americans to own their own homes, so why don?t we encourage people to own their own health care?
The Senator’s plan also removes one of the shortcomings of President Bush’s proposal for tax deductibility of insurance purchases, which still rewarded higher earners more than others. I have argued for state-level health insurance tax credits as a way to offset the federal tax code’s penalty, and the left-leaning Urban Institute supports federal credits. If Burr’s bill becomes law, we won’t have to wait for the General Assembly to do the right thing.
UPDATE 7/31: Clarified how the tax exemption works
