Ramesh Ponnuru warns Mitt Romney's campaign to offer a tax credit for buying health-care rather than a tax deduction:
In 2007, George W. Bush’s administration proposed to
start treating individually purchased and employer-provided
coverage the same. People who got insurance either way
would get a “standard deduction” of $15,000 off their
taxable income -- and they would get the same deduction
whether they bought cheap or expensive insurance, restoring
the incentive to economize. Romney is considering reviving
Bush’s idea...
Like today’s tax break for employer coverage, the
standard deduction would be most valuable to people in the
highest tax brackets. The uninsured typically aren’t in
those brackets. As a result, Bush’s proposal would have
done little to increase rates of insurance coverage. At the
high end of estimates, 9 million additional people would
have gotten coverage. (About 50 million Americans lack
insurance.)
That’s why other Republican health proposals have
offered a tax credit instead of a deduction. A credit is
worth the same amount of money in all tax brackets. When
Senator John McCain ran for president, he proposed a $5,000
tax-credit plan for families. Representative Paul Ryan and
Senator Tom Coburn have also introduced tax-credit plans.
Compared with a deduction, a credit would increase the
number of people with insurance much more for the same
amount of money.
