[Congressional Record Volume 144, Number 132 (Monday, September 28, 1998)]
[Extensions of Remarks]
[Page E1833]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


 TAX DEDUCTIONS FOR HEALTH INSURANCE DON'T HELP THE UNINSURED--WE NEED 
                              TAX CREDITS

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                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                       Monday, September 28, 1998

  Mr. STARK. Mr. Speaker, in the $80 billion tax bill the House voted 
last week, the Republicans proposed to provide immediate, 100% 
deductibility for the self-employed (but not their workers!) to 
purchase health insurance. The issue is now before the Senate.
  Democrats have proposed this type of tax relief before, but have 
tried to ensure it includes both the boss and the worker. It would be a 
little step toward helping people meet the costs of health insurance--
but it would do almost zilch to reduce the number of America's 43 
million uninsured.
  Most uninsured either don't file tax returns, are in the zero tax 
bracket or, at most, the 15% bracket. We should admit that deductions 
will do little or nothing to make affordable individual health 
insurance policies bought at retail.
  Today, the law allows a 45% deduction--scheduled to increase to 100% 
by 2007--for the self-employed (but not their workers) who buy health 
insurance. An immediate deduction for the purchase of insurance will 
help folks in the 36% and 39.6% bracket and make insurance more 
affordable for them--but these are taxpayers with incomes above 
$121,300 ($147,700 if a family) who almost certainly already have 
health insurance.
  In June, the U.S. General Accounting Office issued a report showing 
how useless tax deductions are for helping the overwhelming number of 
uninsured.
  First, the GAO pointed out that a tax deduction is good only if you 
itemize your deductions. But in 1995, only 29% of all tax filers 
itemized. Lower income people, of course, are less likely to itemize. 
Only 5% of those with adjusted gross incomes of less than $20,000 
itemized that year.
  Second, deductions are useful only if you pay taxes. Yet of the 
uninsured, about 13 million--more than the population of Virginia, 
Maryland and Delaware combined--were in the zero tax bracket and six 
million others didn't even have to file a return. A deduction is 
totally meaningless for them.
  Third, deductions don't do much for the lower income--and it doesn't 
take a Sherlock Holmes to figure out that the lower income are the 
people who are uninsured. Twenty-plus million uninsured were in the 15% 
bracket and would be helped if they itemized--but not much. This tax 
bracket is for those individuals with taxable incomes of $24,000 or 
less, or if married and filing a joint return, $40,100 or less. As the 
GAO points out, ``The value to a single tax filer in the 15-percent 
bracket who had paid $2,100 in premiums for single coverage would have 
been about $315 while the value to an individual in the highest bracket 
could have been $832 for this same premium amount. For a $5,664 premium 
for a family of four, the value to a family in the 15-percent bracket 
could have been about $850 compared to $2,243 for a family in the 
highest tax bracket.''
  Think of it: a family with taxable income below $40,100 is going to 
spend $4,832 out-of-pocket for health insurance, because they got a tax 
deduction of $850? I sincerely doubt it. The Congressional Joint 
Committee on Taxation has estimated that the benefits of a similar 
Senate bill would go 95% to the already insured; only 5% would go to 
benefit people previously uninsured.
  Tax deductions will make little difference for those in need, but 
will provide additional savings for the already-insured upper income.
  What we really need are tax credits--including refundable credits--
that would be equal for all individuals and families to buy into 
reasonably priced, ``wholesale'' health insurance plans--plans that 
would be group health plans, such as Medicare or the Federal Employee 
Health plans.
  Because credits would actually do something to help the 43 million 
uninsured, they will be expensive. We will need to talk about tobacco 
taxes and other revenue sources to pay for them. It will be tough. But 
if America want to really do something about the uninsured, let's be 
honest: Deductions won't do it. Credits will.

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