Suppose you are a young family. The husband makes, say forty thousand dollars a year. The wife also works and makes twenty-five thousand dollars a year. Sixty-five thousand as a household income. Let’s also say that your family includes three children. For the sake of argument we will say that one of the employers offers health insurance at a mere ninety dollars a month on payroll deduction. There are deductibles and coinsurance – but they won’t break the bank. Everyone has adequate health insurance.
The actual insurance cost for a family of five ranges from ten to twelve thousand dollars a year. So the employer is picking up a hefty part of the tab. The value of the sixty-five thousand dollar income, with health care, vacation, sick pay and other benefits is around eighty-thousand dollars. That will get the family into the bottom of middle class.
John McCain proposes taxing the health care premium as income. Then he will give an extra $2,500 deduction for a single person and $5,000 deduction for a family. So the family of five will be taxed on the ten thousand dollar insurance premium benefit and will be given a $5,000 deduction. McCain would have this family pay taxes on the difference – meaning they would be taxed on another $5,000 that they are not presently taxed on.
Let us make another assumption – the family itemizes and deducts their mortgage premium. With their deductions they are in a 10% tax bracket. That means they will pay 10% on the $5,000 difference in final taxable income.
$500 more tax per year for the bottom of the middle class.