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How does McCain’s $5000 tax credit for health insurance work?
McCain talks about his $5000 tax credit if you buy health insurance. But he’s not giving us $5000. It’s a tax credit, so if we spend $5000 on health insurance then we don’t have to pay taxes on that $5000. If we put that $5000 in the bank instead, then we’re taxed on it. Is that right?
If my understanding is correct, then what happens in the McCain health insurance plan if you don’t have $5000 to spend on health insurance? Do the 50 million uninsured Americans have that $5000? If they did, wouldn’t they have paid for insurance anyway, even without the tax credit? All the tax credit would actually save them is the actual $1500 in taxes they’ve paid on that $5000 until now.
Here’s how McCain’s plan works:
If you’re insured through your employer: You already are getting a tax break – worth about $4,200 to the average American family. You don’t see it because your health insurance – which is part of your compensation package – is tax-free.
McCain’s tax credit of $5,000 for a family would replace this $4,200 break you’re currently getting – and then some.
If you’re uninsured or have individual insurance: You’re NOT currently getting the same tax break as all those people insured through their jobs. McCain’s credit would give you the same advantage they would have – even if you make too little to pay income tax. It’s a “refundable” credit, meaning you get it anyway, even if you don’t owe taxes.
The tax credit replaces a break 60 percent of workers are already getting – and gives new money to those without coverage to buy insurance. Even now, policies bought on the individual market cost about half as much as employer-based policies, so the $5,000 credit will go a long way toward helping them buy coverage.
The money is specifically for health insurance, which is why the credit goes to the insurance provider of your choice to pay your medical bills. Obama attacked that provision in one ad, saying it would leave taxpayers on their own to pay a new health tax. That’s incorrect.
Edit: Thanks for asking. You would still get that refund, it would be paid directly to the insurance company of your choice.