I can't believe I'm saying this, but I think that Bush might have had an idea that would benefit the poor. Specifically, I'm referring to his soon-to-be-announced health insurance plan. Basically, it would tax folks who pay more than approximately $625/month in health insurance (per individual, so $1250/family) on the amount above that threshhold, to help cover those who are not insured through their employer, or who are not insured whatsoever. If I understand it, this would mean, in effect, if your individual plan is $700/month, you would pay taxes on $75/month = $900 of "income." In other words, assuming a tax rate of 20%, you could pay an additional $180 of taxes in that year. If your individual plan is $1000/month, you would pay taxes on $4500 of "income", or $900. This might seem like a lot of money, but let's take a realistic look at things. $900 is $75/month, which is the cost of having cable television in most areas. So, even if you're getting ripped off BIG time (NOBODY should be paying more than $700/month per person for health insurance coverage, even in New York City), you'll only have to pay the cost of cable television. If you're making $30000/year, this is 3% of your income, so even relatively poor W-2 people would not see a big tax hit.
This could be huge. Just a few years ago, I was among those who were paying for health insurance out of pocket. As a resident of Manhattan, I was spending more than 50% of my income on rent (very typical in New York), and spending approximately $300/month on health insurance. At the same time, with a yearly income of just above the poverty line, because of an inability to deduct the rent, and an inability to deduct the cost of medical insurance, I was paying double the national average in taxes for my tax bracket, because of W-2 employees in other parts of the country who were able to buy houses and had employers paying for health care. Now, I'm on the other side, as an employee of the University of Nebraska, the health insurance is significantly cheaper, has more coverage options, and is tax deductible. The benefits to a W-2er are undeniable, and providing these benefits to the poor is a tremendously powerful idea. "But wait," you might be thinking, "why the hell should I pay taxes on my hard-earned money to help some loser who can't hold down a real job to pay for their doctor? I'm not rich, I have enough trouble supporting my own family, this poses an unfair burden and will cause me to have to cut back on important things like my charitable giving!"
OK whoa, let's step back and take a look at the most important part of the article: "...tax breaks to help low-income people buy health insurance and tax
increases for some workers
whose health plans cost significantly more
than the national average." The highlighting is my own. Basically, The plan would take some money from those with exorbitant medical insurance and use it to subsidize the poor. It's not really a tax on the middle class, it's a tax on the rich, and on the stupid (those who don't understand how to shop around for affordable health insurance).
The primary criticism in the article from Charles Rangel is that "We are trying to bring tax relief to the middle class. The president is
trying to increase their tax liability. This proposal is inconsistent
with what the majority is seeking in the House and the Senate." Now wait a minute here! Since when do the Democrats use distortion of the discussion to justify killing something that would benefit the poor? This is something that makes me very uncomfortable. We, as a society, have a responsibility not just to maintaining the wealth and stability of the middle class, but also to providing for the comfort of those who cannot fend for themselves. In many other societies where this is not a priority, terrible inequalities often lead to the rise of revolutions (think France, 1780's) or even, in some cases, to modern-day terrorism. This is not to say that we should protect the poor so they won't kill the rich or middle class, quite the opposite. Instead, we have a moral obligation to protect the poor and it would be stupid not to do so for the health of society at large.
Actually, to be honest, the most similar distortion that I have heard was the Republican push to call the Estate tax a "Death tax" and wrongly represent it as something that could affect average Americans, when it really only affects 2% of the population. What does this tell us about the Democratic party, champions of the underclass?
Having said all of this "yay" talk, it is important to note that when I was a super poor starving artist, the majority of my tax liability was not income tax, but was in fact social security and medicare tax. This is also true of almost all truly poor Americans. I didn't actually pay a cent in income taxes for 4 straight years, and yet still have tax bills of $1000-$2000 dollars each year - about 10-15% of my yearly income, or to put it closer to the point, food and transportation for 3 months. This proposal will only truly benefit the poor if the deductions come out of pre-tax income, before social security and all of that jazz is even calculated. So, I will remain skeptical until I see the actual plan.
In addition, we often forget that taxes and deductions are percentages. It is not like people will suddenly have $7500 more income. This plan means an actual maximum potential income increase of more like $1125-$2250. This might not sound like much if you're middle class or rich, but when you realize that we're talking about a poor person, this could mean an actual post-expense/post-tax doubling or tripling of available cash. For a very small price to those with luxurious medical coverage, we could see a real improvement in the life of the ultra-poor.
I can't help but wonder what the catch is, Bush has proposed mediocre to outright terrible things for the poor for 6 straight years, why would he suddenly go all socialist over a lost election? Time will tell.
