[Congressional Record (Bound Edition), Volume 145 (1999), Part 7]
[Extensions of Remarks]
[Pages 9777-9778]
[From the U.S. Government Publishing Office, www.gpo.gov]



          INTRODUCTION OF THE WORKING UNINSURED TAX EQUITY ACT

                                 ______
                                 

                           HON. JIM McDERMOTT

                             of washington

                    in the house of representatives

                          Friday, May 14, 1999

  Mr. McDERMOTT. Mr. Speaker, today I rise to share with you some ideas 
that both Representative Rogan and I have about how to begin addressing 
the issue of the uninsured.
  Many of us are stymied by the health care paradox of a booming 
economy. Our economy is booming. Unfortunately, parallel to this 
economic growth is the growing number of uninsured. There are now 
almost 44 million uninsured people in this country--an increase of more 
than 5 million since 1993.
  Today, we are introducing legislation to help stop the increase by 
targeting a 30% health insurance tax credit to the working uninsured. 
To qualify for our partially refundable credit, taxpayers must not 
currently be offered health insurance through their employer and they 
must have an individual income below $30,000/yr or a joint income of 
less than $50,000/yr. To ease administration, these income limits have 
been designed to match those of traditional IRAs.
  When the General Accounting Office evaluated a similar proposal last 
June, it found that almost 36 million individuals without employer-
based coverage--roughly 75% of the uninsured--would be eligible for the 
full credit on the basis of their adjusted gross income. Additionally, 
under our proposal, the self-employed would have the opportunity to 
choose between our proposed credit or the 60% deduction allowed by 
current law.
  The benefits of this proposal are not only that it provides a tax 
benefit for those who need it most, it also would encourage health care 
consumers to be cost-conscious when choosing their health insurance 
loans so that they could maximize the value of the credit.
  As you consider our proposal, keep in mind three questions: (1) who 
the uninsured are, (2) how has the tax code impacted health insurance 
in this country, and (3) most importantly, what can the 106th Congress 
realistically do to address this important social policy issue.
  First, who are the uninsured? Contrary to what many people might 
think, roughly 75% of the uninsured work full or part-time. The 
remaining 25% are split evenly between those who are unemployed and 
those who are not in the labor force.
  There isn't enough time today to talk at length about the 
demographics of the working uninsured. If we did, we'd find that most 
of them are age 18-34, that a disproportionate number of them are 
minority, that working poor parents are twice as likely to be uninsured 
as poor parents who are unemployed, and that the highest rate of 
uninsurance impacts pre-seniors between the age of 62-64.
  Second, how has the tax code impacted health insurance in this 
country? Since WW II, America has relied on employers to provide health 
insurance and has rewarded them accordingly through the tax code. But, 
a growing number of workers lack employer-based insurance which policy-
makers once took for granted.
  Let me give a practical example of how the working uninsured fall 
through the cracks of our current employer based system. It you make 
$6.50 an hour your after tax income is $11,500. If you tried to 
purchase an average health insurance plan it would cost you about 
$3000. It is obvious that if the working poor are going to get health 
insurance we are going to have to come up with a way to help them.
  I think we should all find it unacceptable for a person who works 
full time in this country not to be able to afford health insurance.
  Third question, how do we in the 106th Congress address the issue of 
the working uninsured?
  As you all know, I am a strong believer in universal health insurance 
and that the most efficient way of providing it is through a single 
payer financing system. A system that would lift the prohibitive burden 
of health insurance administration from employers and replace it with a 
public premium that shares responsibility throughout society.
  But, if there is a way for us to guarantee universal coverage without 
single payer--through a plan based on tax credits, Clinton-care, or 
Medicare for all--I am willing to look at the proposal, as long as the 
plan guarantees access to quality care that's affordable. My bottom 
line is quality care at an affordable price.
  Unfortunately, just because something is efficient--such as a single 
payer system--doesn't always mean that it will pass anytime soon. The 
reality is that the political climate to have an honest debate about 
universal coverage was destroyed by partisan bickering in 1994.
  As a policymaker, the next question for me then becomes, what can we 
do in the near term to help folks who need health insurance today.
  The tax code is a good place to look. After all it is the foundation 
of our employer-based health insurance system.
  For a number of years now, this issue for me has been about simple 
tax fairness. As many may know, Congress recently made matters worse by 
passing legislation to allow the self-employed to deduct 100 percent of 
the cost of health insurance from their taxes. Since 1995, I have 
attempted to equalize the tax treatment of health insurance benefits by 
offering amendments on the House floor and in the Ways and Means 
Committee, and by introducing H.R. 539 in the last Congress.
  My rallying cry--which I am glad to see is starting to take hold--has 
been the rhetorical

[[Page 9778]]

question: Why should a doctor or attorney who is self-employed be able 
to deduct a portion of the cost of his/her health insurance, while a 
secretary, who must buy his/her own health insurance policy, not be 
able to deduct one cent of the cost!

  So as a simple matter of fairness, this inequity in the tax code 
needs to be fixed.
  According to the DC-based Lewin Group, the average federal health 
benefits tax expenditure is $918 per family. That sounds pretty good 
until you realize that a family whose income is below $40,000 receives 
an average of $766 in tax benefits, a $30,000 family receives just $500 
in tax subsidies--and the numbers get more depressing if I continue 
down the income scale.
  The bulk of the tax subsidy is going to those who need it the least. 
If you make $100,000 or more, the tax code subsidizes your health 
insurance each year by more than $2,000.
  So it seems to me that if Congress wanted to address the issue of tax 
fairness and assist a group of people who are in most need of health 
insurance, it would look at our proposal for a 30% credit. Our proposal 
is a reasonable and prudent approach to helping people who the system 
has forgotten about.
  We are initiating the debate with a less is more approach. Our 
legislation will be less than 6 pages long.
  I am hopeful that the sudden interest in tax code equalization will 
allow for thoughtful discussions and critiques of the wide range of 
proposals that will be offered this year.
  In particular, as policymakers put forward proposals, they need to 
consider what the ``take up rate'' will be (will people use the credit 
if they are eligible), how does it impact existing employer health care 
contributions, and how much does the proposal cost.
  I don't want to leave you with the impression that our limited 
proposal is the ultimate answer. I view it as a first step toward 
finding a solution for the uninsured.
  I am proud of the fact that it is a moderate proposal because there 
are so many uncertainties about how it would work.
  For example, we completely avoid the issue of market reforms because 
going down that route creates more divisions among political parties 
that can be realistically addressed in this Congress. By gently 
impacting the individual marketplace, I am hopeful that state 
legislatures will take steps to rationalize their individual markets 
and Congress can learn from both their successes and mistakes.
  Conversely, more costly proposals that hope to dramatically influence 
the marketplace must include meaningful market reforms. Otherwise, such 
proposals will just be throwing large amounts of federal tax 
expenditures at an individual marketplace that is already overpriced. 
But there is no consensus around market reforms to be found.
  I would also be especially cautious about more ambitious tax credit 
proposals because they run into serious financing problems. How do you 
pay for it without running a deficit? Even in this era of expected 
budget surpluses, a hefty price tag simply is prohibitive given our 
other national policy priorities.
  More importantly, current comprehensive tax credit proposals may not 
be such a good deal for either the insured or the uninsured. If they 
appear too generous, employers will drop coverage and allow for their 
existing costs to be replaced with an inadequate government voucher, a 
voucher that would not come close to equaling their existing coverage.
  Letting employers off the hook while increasing government and 
beneficiary costs would make the problem worse.
  I am the first one to say that our credit should not replace the 
current system. If it did, it would be inadequate. That is not to say, 
however, that most of us in this room would not like to see the current 
system totally overhauled.
  I view our proposal as a targeted effort to stop the current health 
insurance hemorrhaging, to induce some additional people to purchase 
health insurance before they get sick, as an achievable goal in a very 
divided Congress, and a stimulant of the necessary discussion we need 
to have about how this country can create an efficient means of 
providing universal health care coverage.
  Chairman Archer has said he would like to mark-up tax legislation 
later this spring. Jim and I already have written him and Mr. Thomas 
asking them to look closely at our proposal for its immediate benefits. 
We have also asked the White House to look at our proposal and I hope 
that they too will once again show leadership by joining us in 
attempting to tackle this difficult issue of the uninsured.
  By bringing people together, I am confident that we can build 
momentum within the Congress to generate bipartisan support behind 
proposals that begin to address the needs of the uninsured. Passage of 
our credit would be a first step toward enlightening that discussion.
  I urge my colleagues to join us in our bipartisan effort.

Average Federal health benefits tax expenditure by income level in 1996

Average Per Family $918:
    Less than $15,000...............................................$63
    $15,000 to $19,999..............................................288
    $20,000 to $29,999..............................................497
    $30,000 to $39,999..............................................766
    $40,000 to $49,999............................................1,177
    $50,000 to $74,999............................................1,558
    $75,000 to $99,999............................................1,767
    $100,000 or more..............................................2,059
Source: Lewin Group estimates using the Health Benefits Simulation 
Model (HBSM).




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