John McCain’s pandering on taxes has been one of the more embarrassing aspects of his campaign, as evidenced by his appearance at the Aspen Institute, when he admitted that he’d been pushed into a corner on Social Security and taxes, saying, “I have to be against tax increases, as you know.”
But for all the talk about McCain’s recklessness on tax policy, there’s a little secret that goes by largely unmentioned: the presumptive Republican nominee is actually proposing a tax hike on those who get employer-based healthcare coverage.
In their Wall Street Journal piece yesterday
, Jason Furman and Austan Goolsbee, economic policy advisors for Obama, highlighted the policy detail McCain prefers to downplay.
…Sen. McCain’s plan does include one new proposal that would result in higher taxes on the middle class. As even Sen. McCain’s advisers have acknowledged, his health-care plan would impose a $3.6 trillion tax increase over 10 years on workers.
Sen. McCain’s plan will count the health care you get from your employer as if it were taxable cash income. Even after accounting for Sen. McCain’s proposed health-care tax credits, this plan would eventually leave tens of millions of middle-class families paying higher taxes. In addition, as the Congressional Budget Office has shown, this kind of plan would push people into higher tax brackets and increase the taxes people pay as their compensation rises, raising marginal tax rates by even more than if we let the entire Bush tax-cut plan expire tomorrow.
Got that? McCain’s hollow healthcare plan is bad enough, but the fine print includes a possible tax increase on tens of millions of people in the middle class.
What’s the McCain campaign’s response to this? It’s simple: just redefine “tax increase.”
Matt Yglesias did a nice job summarizing the McCain gang’s response to the notion that workers’ healthcare benefits should be taxed.
Doug Holtz-Eakin, writing for the McCain campaign disputes the characterization of this policy as a tax increase, arguing instead that it “is a transformation of the tradition of a tax subsidy to private insurance to make sure that subsidy is fair, both in the sense that it is available to every American regardless of the source of their private insurance and that every person gets the same amount — $5,000 for a family, $2,500 for an individual.” James Kvaal counters that McCain’s plan “would tax workers’ health benefits, which are largely tax-free today,” thus increasing the amount of tax people need to pay, which is a tax increase in any common sense understanding of the term. More important, though, is the fact that the new somewhat counterbalancing subsidy McCain is proposing won’t make up the difference over the long run:
“Second, the value of McCain’s credit will erode quickly. While health care premiums are expected to grow by 7 percent a year, McCain’s credit will increase by only about 2 percent a year. In contrast, current tax benefits keep up with rising premiums.”
You can read more here (PDF) but I would note that one thing we’re seeing here is the basic fatuousness of the conservative monomania about low taxes. What Holtz-Eakin is really trying to get at here is that Holtz-Eakin thinks McCain’s proposal is a good proposal that will treat people more fairly. This is debatable and goes to the issue of whether or not it makes sense to reduce the overall scope of public subsidy for health insurance at a time of rising health care costs in order to clear budgetary space for high-income tax cuts. But pretty clearly what’s proposed here is a tax increase. Which in a sane world, conservatives would be prepared to admit. But since they’ve spent the past 30 years trying to convince people that any hint of tax increase for any purpose is the purest evil they’re now stuck in a rhetorical trap of their own devising.
I know this subject is just a little complicated — the explanation doesn’t fit on a bumper-sticker — but I’d still love to see the Obama campaign use this as a cudgel. Tell the tens of millions of Americans who have no health insurance that McCain will continue to leave them behind, and tell the tens of millions of Americans who rely on employer-based coverage that McCain wants to tax their benefits.
McCain’s latest ad is one big lie about tax increases. But under the circumstances, the McCain gang is leading with their chin — Obama is proposing a bigger middle-class tax cut than McCain, and McCain is proposing a tax increase on tens of millions of Americans who rely on employer-based healthcare.
OK, Obama campaign, where’s the ad?