Health care tax parity

In early 2007, President Bush announced a new health care proposal. The plan centered on two primary initiatives. First, it would treat the cost (both an employer and an employee’s payments) of an insurance policy as taxable income. This would raise workers’ taxable wages substantially. Second, the plan called for a standard tax deduction for those who purchase health insurance. The deduction would be $15,000 for family coverage and $7,500 for individual coverage. The changes would provide a tax cut for consumers who could keep the cost of their policy below the size of the new deduction. This, Bush argued, would help slow the cost of health insurance coverage. In addition, he stressed that the plan was fair, for it would give individuals who buy insurance on their own the same tax break as those who get it through employer-sponsored plans.

Opposition
Many Democrats were skeptical of Bush's plan. While many agreed that health insurance should be less burdensome for self-employed individuals, some argued that the plan did little to address the 47 million Americans who had no health insurance at all. In addition, some said the plan targeted the wrong citizens. Sen. Ted Kennedy (D-Mass.), chair of the Senate Committee on Health, Education, Labor, and Pensions, stated, "While the president's focus on healthcare is important, his proposals will only worsen the crisis by undermining the quality coverage that millions of working families now rely on, and replacing it with a tax break that will benefit the wealthiest Americans." Sen. John Kerry (D-Mass.) added "Why would anyone agree to this?...If you have good insurance now, you'll pay more for it, and there's still no guarantee that the most vulnerable uninsured Americans would have access to a quality, affordable insurance option."

On February 27, a preliminary estimate on the cost of Bush’s proposal by the Joint Committee on Taxation put the total cost at $526 billion through 2017. The nonpartisan staff’s projection differed greatly from the administration’s estimate, which argued the policy would be “revenue neutral” over ten years. Analysts said the difference in the estimates was likely due to different estimates regarding the rate at which health care costs will rise from 2007-2017.

After the announcement, Rep. Pete Stark (D-Calif.) criticized the plan, stating “He doesn't like tax increases…This is sure as heck a tax increase.”