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January 23, 2007
White House Releases More Details on Healthcare Plan

The White House held a press briefing to reveal more details on President Bush's plan that would create a standard health insurance tax deduction, which would also act as a cap on the amount of employer-provided healthcare benefits that are exempt from taxation.

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Under the proposal, employer-provided healthcare insurance would be treated as taxable income. However, the proposal would allow a standard tax deduction for healthcare insurance of $15,000 for people purchasing a family policy (through an employer or on their own) and $7,500 for those purchasing a single policy (through an employer or on their own).

Therefore, people who purchase healthcare insurance that costs less than those amounts would see lower taxes because they could still take the full deduction, according to the White House. People who purchase policies costing more than the standard deduction would actually see their taxes increase because they would be taxed on the excess amount. People who purchase a family policy that costs $25,000, for example, would have to pay income taxes and payroll taxes on $10,000 of it.

The White House says that about 80 percent of policies offered through employers are under the standard deduction and that those policies would be subject to lower taxes.

The plan would expand healthcare coverage by offering the uninsured the same tax breaks as those who receive healthcare insurance through their employers, says the Bush administration.

The White House would like to implement the plan beginning January 1, 2009. The amounts of the standard deduction for healthcare insurance would be indexed to the Consumer Price Index, instead of medical costs.

During the press briefing, Katherine Baicker of Council of Economic Advisors addressed how the plan would affect employers.

"So as far as the employer is concerned, everything is the same except they now treat this premium that they were paying for you just like they treat the wages that they paid you," says Baicker. "So it shows up on your W2. It's FICA--payroll taxes are due on it and income taxes are due on it. But you get to take the first $15,000 of your compensation--if you have a family plan-- tax-free. So for 80 percent of the policies offered by employers, that's going to be--that $15,000 is going to be more generous than the add-on of the premium that you're getting paid."


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