Like everyone else, I watched the Palin-Biden debate last night. I thought they both did very well. Palin exceeded expectations so I think it was probably a net plus for the McCain-Palin ticket.
But as a tax dude my ears perked up when I heard Palin say this,
[John McCain] has a good health care plan that is detailed. I want to give you a couple details on that. He is proposing a five billion dollar tax credit for families so they can get out there and purchase their own health care coverage. A $5,000 tax credit, that is budget neutral. That doesn’t cost the government anything.
“How could a tax credit be budget neutral?,” I thought.
The term “tax credit” is defined in AllBusiness.com as a
[D]ollar-for-dollar reduction in the amount of tax that a taxpayer owes. Unlike deductions or exemptions , which reduce the amount of income subject to tax, a credit reduces the actual amount of tax owed; see specific credits, such as child care credit , earned income credit , rehabilitation tax credit , tuition tax credit , and elderly or disabled tax credit .
So, a tax credit standing alone cannot be “budget neutral.” It is simply impossible. Which means that if McCain’s overall plan (not the tax credit standing alone) to provide health care relief is budget neutral it must be funded i.e. paid for by tax increases somewhere else.
And, lo and behold, it is. Listen to Scott Anderson from CNN’s Election Center 2008:
Under McCain’s heath care plan, individuals would be eligible for a $2,500 credit and families a $5,000 credit to help pay for health insurance if they do not subscribe to, or do not have access to, employer-provided health care coverage. The government would send the money directly to insurers.
McCain’s plan would cost $3.6 trillion over 10 years, the campaign said. McCain would pay for the program by eliminating the tax break employers get for offering insurance.
This may seem nit-picky to some, but I learned long ago to clench my sphincter muscle when a politician tells me “this isn’t going to cost the taxpayer anything.”
2 responses so far ↓
1 Tina Marhsall // Oct 3, 2008 at 12:40 pm
Greetings,
I found what you said very insightful- it’s hard to pick up some of the minuscule details when listening to the fast-paced nature of the debate. I appreciate sites like this that break it down.
I came across another blog this morning about taxes..much more simple and enjoyable than what our systems entails today. Thought you might find it interesting. (It’s the article titled the 16th Amendment.)
http://www.petermanseye.com/
Cheers.
2 Peter // Oct 3, 2008 at 5:04 pm
Tina, thanks for the nice words. I read The 16th Amendment over at Peterman’s Eye. I found this statement interesting:
“Today, the complete tax code, with accompanying regulations, contains over 60,000 pages and is so complicated that even CPA’s don’t understand it. At least mine doesn’t.”
I think Peterman needs a new tax advisor.
I know a good one.
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