The initial response to President Bush�s new health care proposal indicates that it is unlikely to go very far, but it is still worth considering its implications. The basic principle is reasonable, even if it does little or nothing to address the real problems of the country�s health care system: it equalizes the tax status of health insurance regardless of whether it is purchased through an employer or by an individual worker. Of course a tax break matters much more to taxpayers in high income tax brackets than to low-wage workers with little or no tax liability. But, President Bush has something for low wage workers also. Under his plan, a worker who buys a family plan would pay no payroll tax on her first $15,000 of income. Since the combined employer/employee tax is 15.35%, this would mean a substantial tax break even for low wage workers. (It�s not clear from the proposal if workers would get the employer-side payment refunded.) But, there is a flip side to this tax break. If workers pay less money into Social Security, they would also get less back. To take an extreme case, imagine a worker whose pay averages $20,000 a year. Currently, this would salary would get this worker $11,000 if she started collecting benefits at the normal retirement age. Under President Bush�s proposal, the worker would only be credited with $5,000 a year towards her Social Security benefits, getting her $4,500 a year when she retires. This is a big difference. As I said, it seems unlikely that President Bush�s health care plan will go anywhere. However, insofar as it is taken seriously, the media should explore all its implications, especially its implications for the Social Security benefits of low wage workers.
--Dean Baker
