The healthcare reform debate seems to have progressed to a point where the largest concern is now how to pay for it (it being the $120 billion a year needed to cover the nearly 50 million uninsured).
In his budget, the President has proposed limiting tax deductions on charitable contributions and mortgage interest—deductions mostly enjoyed by the affluent—to raise about $30 billion, half of the new revenue the administration plans to use to put a “down payment” on healthcare. Many in Congress—Senator Baucus and Representative Rangel, in particular—almost reflexively rejected the proposal, leaving the plan $90 billion in the red.
So unto another feasible option: capping the tax deduction for employer-provided health insurance. Currently, the government loses out on $250 billion in taxes annually because of the deduction. By capping it—applying it only to the lower end of the spectrum of those with employer-provided health—and making it a much more progressive deduction, the government could comfortably bring in the remaining $90 billion.
But lo and behold: “Charles Rangel, the influential Democratic House member, say[s] [he] remain[s] firmly opposed to capping the deduction.”
WHY? Would he prefer to cut back on health spending, lower the amount of subsidies available, and thereby leave some people unable to afford coverage? Why is he so strongly opposed to sensible tax revisions to pay for health? And why do we need to subsidize charity in the first place?
This tax deduction—which makes healthcare for an unemployed or self-employed person much more expensive—is essentially a subsidy from people who don’t receive healthcare insurance from their employer to people who do (who are already relatively more well-to-do).
