27 Sep 2008 18:47
McCain will tax employers (and workers) for healthcare benefits
Posted by Steve under NewsNo Comments
Factcheck.org is wrong when they say Obama “mischaracterized” an aspect of McCain’s health care plan.
In last night’s debate, Obama said that under McCain’s proposal, “Your employer now has to pay taxes on the health care that you’re getting from your employer.”Factcheck says Obama got it wrong, and Factcheck says that employers would not “be taxed on the value of health benefits provided to workers.
“Factcheck is forgetting about FICA, a 15%+ payroll tax split between employers and their employees. The employer tax rate on wages and taxable benefits is around 7%. Absent a new loophole for employers in McCain’s plan, if health benefits become taxable, well, they become taxable, and they will be taxed.
Under McCain’s plan, employers that provide health care benefits will have these three choices, none of which is likely to help fix the health care problem:
- Increase their health care budget by 7% to pay the new McCain tax (which is separate from any inflationary rise in health care costs)
- Reduce health care benefits to employees by 7% in order to stay even
- Stop providing health care benefits to employees, since those costs will rise even more rapidly than earlier predicted
Personally, I think payroll taxes are a good thing, but they should apply to benefits only when those benefits are surrogate wages (company cars, houses, stock, golf memberships, and so on). Until we have government health care, employer-provided health care benefits should remain untaxed, for both the employer and the employee.
If Obama got something wrong here, it wasn’t a fact. Obama missed the opportunity to point out that under the McCain proposal, both workers and employers will be taxed on the value of employer-provided health care benefits.
