Tuesday, September 16, 2008

I Got An Uncle Lives In Taxes

It's not often that a 'fact check" gets it wrong, but here's an example of a partisan fact check:
McCain has proposed to end one of the largest tax breaks in the entire economy. Some 60 million Americans buy health insurance thru employers tax-free, and McCain would indeed begin to tax the value of the benefit.

However McCain also proposes to give the money back as a tax credit, $2,500 for individuals, $5,000 for families.

"Let's give them a $5,000 refundable tax credit to go out and get the health insurance of their choice," McCain said.

Because a tax credit is money in your pocket?

Is it?

What is a tax refund? A tax refund is what's left over after your tax liability has been figured out. It is, in essence, an interest free loan to Uncle Sam.

(Side note: In an Actor212 NotPresidency, I would insist the rules be changed that you receive interest at the Applicable Federal Rate on any refund you obtain. But I digress...)

A tax credit merely lowers that tax liability: in effect, it is a dollar for dollar reduction in your taxes, which you've already paid into the pot.

Now, would your taxes go down? Yes, that's a given, particularly since the tax on the health insurance premium plus the insurance premium itself would be less than the $14,000 maximum premium you'd be credited for.

But...you're still paying for the premium, and you're still paying for the tax.

After all, the average annual premium for an individual in the US is about $4,500. But, the average annual premium for a family of four is, ready for this? $12,500 give or take!

So the benefit to a family of four of a tax credit of $5,000, assuming they pay the top tax rate of 35% ($5,000/0.35) would cover a $14,000 premium.

In other words, you're saving maybe $1500 a year or $525 in taxes!

And look what would happen once this new tax was insituted: insurance companies would now be forced to report to the government the premiums paid by employee (as a check to the payroll reports individual employers now provide to the IRS, such as your W2 form).

Who pays for that administrative cost? You do.

This is another example of the mindless, piecemeal, irrational economic approach of what was supposedly the more financially savvy of the two major parties: you know, they made the money to BE Republicans, so they must know how to pass that knowledge on to us, right?

Eight years of a Bush Presidency, which included six years of a Republican Congress, has proved the fallacy of that notion. Next to no job creation (as opposed to Clinton, who created more jobs than anyone else in history, unless you count the global war machine galvanized against Adolph Hitler), an S&P 500 & Dow Jones 35 that has actually lost ground, mortgage foreclosures at all-time record levels, an unemployment rate higher than any seen in a Democratic administration since the 1940s (save for Clinton's first year in office), personal income declines, and now the tanking of the banking and insurance sectors.

Is this any way to run the greatest nation ever to appear on the face of the planet?????