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McCain’s Health Care Tax Plan Is Not a Tax Hike

2 min readBy: Gerald Prante

Today in the Wall Street Journal, three economists that support Barack Obama, David Cutler, Brad DeLong and Ann Marie Marciarille gave a misleading account of John McCain's health care taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. plan. Repeatedly, the op-ed called McCain's plan a tax hike. It is not. In the aggregate, it is one huge tax cut that would cost the Treasury a lot of money. It is true that for some households, tax bills will rise, but overall and for most of those outside the high-income bracket, it would be a tax cut. Here's what Cutler, DeLong and Marciarille claim:

In contrast, Sen. McCain, who constantly repeats his no-new-taxes promise on the campaign trail, proposes a big tax hike as the solution to our health-care crisis. His plan would raise taxes on workers who receive health benefits, with the idea of encouraging their employers to drop coverage. A study conducted by University of Michigan economist Tom Buchmueller and colleagues published in the journal Health Affairs suggests that the McCain tax hike will lead employers to drop coverage for over 20 million Americans.

What would happen to these people? Mr. McCain will give them a small tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. , $5,000 for a family and $2,500 for an individual, and tell them to navigate the individual insurance market on their own.

For middle- and lower-income people, the credits are way too small. They are less than half the cost of policies today ($12,000 on average for a family), and are far below the 75% that most employers offering coverage contribute. Further, their value would erode over time, as the credit increases less rapidly than average premiums.

But here's what a CBS News article said quoting the Tax Policy Center about this plan:

"It's mostly a tax break," said Len Burman of the Tax Policy Center.

The non-partisan tax policy center says except for the very richest Americans, most people buying insurance will see a tax cut.

"Families at all income levels would pay lower taxes, at least on average," said Burman. "On average, is about a $1,200 tax cut in 2009."

The Obama campaign has been quick to put out Tax Policy Center figures to counter the misleading McCain ads that try to portray Obama as a "tax-hiker." But now you have Obama campaign supporters pulling out the same type of misleading attacks that the McCain campaign did on taxes.

We can have a debate about whose health care plan is better. But even if you support Obama's plan, you should not twist the truth about McCain's plan.

Why oh why can't we have more honesty on tax policy in this campaign? I said before that the Obama campaign would probably never reach the level of dishonesty on tax policy that the McCain campaign showed early in this campaign. But the next two months may prove me wrong.