Simple question here. I don’t need to hear how horrible Trump is. I’m not voting for him. I don’t need to hear that he doesn’t have a real healthcare plan. I know that. One simple factual question:
I read on his website that part of his plan to make healthcare great again is to allow all Americans to deduct their healthcare costs from their taxes. Is there any concrete data on how much of a tax revenue shortfall that will create?
Trump’s healthcare plan is the best money can buy.
If you haven’t got money, well, you don’t get a plan.
That’s about it.
Because if you are making dirt wages you just aren’t going to be able buy a decent health policy, or any, so it doesn’t matter if you can deduct it from your taxes (if any) or not.
It would depend very much on exactly what can be deducted.
Still, I think you could probably get an estimate of what would happen if you could deduct all of it. Figure out the full U.S. income tax revenue and divide that by the GDP to get an average tax percentage. Multiply that by the amount we spend on medical care.
From what I quickly googled, we have a $18.55 trillion GDP in 2015, and income tax comes to $3.25 trillion. So that gives an average tax rate of 17.5%. Healthcare costs are around $10,000 per person, which, when multiplied by 320,090,857 people, get us about $3.2 trillion. Multiply that by 17.5% and you get $560 billion.
That’s lumping more together than just the effect you were asking about. There’s more detailed discussion in the “Federal Deficit” section of their findings for different aspects of three related proposals they modeled.
Wonder why it’s so much lower than the math I did. Did I goof up, or are my assumptions wrong? Or is it just that there are a lot of things that wouldn’t be deductible?
That’s nonsense. The substantial majority of people already get the vast majority of their healthcare costs deducted from taxes (because the get employer provided health care–which is not taxed) or they get government provided health care (Medicare/Medicaid/VA health…).
Pasttense pointed to part of it. Healthcare spending numbers include things like employer shares that aren’t taxed and Medicare payments on healthcare for some of our biggest spenders. Your back of the envelope contribution also ignores the tax advantages of spending through HSA.
I’d suspect there’s some issue with using averages as well. I’d be surprised if there’s not differences in spending on healthcare across income groups. A more detailed analysis of effective tax rates by income group and that groups average spending on healthcare probably has something to do with it.
Thanks for completely ignoring the OP right in the first response.
I didn’t ignore it, I pointed out that his system only works for an individual if they’re making enough money to purchase healthcare. If you’re at minimum wage you don’t, and you won’t get a healthcare policy. That’s what will happen if the Republicans “repeal” the ACA and then say you can deduct your healthcare costs from your taxes.
Thanks for the link. I knew it was a bit more complicated than a simple division problem.
Speaking of HSAs one of his proposals is to make them universal and allow them to accumulate. I would not be against that. I have never taken advantage of one because I don’t like the use or lose aspect.
HSA’s are not use-it-or-lose-it. You may be thinking of Healthcare FSAs. And even those allow for carryovers now, I believe.
I do wonder why HSA’s are limited on only folks with High-Deductible plans. What’s the point of that?
I know what you were pointing out. It ignored my question. I stated up front his plan sucks. I was asking for an estimate of the cost of one of his few concrete proposals.
Sorry my mistake I thought they were the same. I have only ever been offered a FSA and it has always been use or lose including the current one available to me.
Two things:
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Without some sweetener over and above the FSA, nobody would buy an HDHP. Too much risk, not enough reward. The HSA, especially after a couple years’ accumulation, massively mitigates the inherent risk of an HDHP.
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The Feds did not want to go to a program where essentially all OOP medical costs were 100% tax deductible for everyone from the first dollar, whether itemizers or standard deduction takers. For the reasons being discussed in this thread. Which is exactly the net effect you’d get if everybody* could have an HSA.
*Ref Broomstick, everybody who has a job and earns enough to afford medical care at all.
I suppose I could go to Trump’s website and maybe find out, but it’s Saturday and I’m lazy. So, question: Does the deductibility of health care expenses include the employee’s portion of insurance premiums?
I ask because my understanding of current tax law is that health care expenses other than employee’s portion of insurance premium in excess of a specified percentage (currently 7.5%) of AGI are deductible. So, suppose you have AGI of $50,000, your employee portion of health care insurance is $5,000 and your other health expenses are $3,500. Your total health care expenses are $8,500, none of which is deductible since the $3,500 does not exceed 7.5% of AGI. If your other (non insurance premium) expenses were $4,000, you would be able to deduct $250.
So, under the above scenario, does the Trump plan allow you to deduct your full $8,500 in health care expense, or merely the $3,500 in non-premium expenses?
If it is the full $8,500, what impact will this have on the portion of health care insurance that employers will tend to provide? Employers pay part of the health care premium because it’s tax advantageous to the employee for them to do so. In the above example, if the employer is paying $5,000 in health care premiums for that employee, the employee gets the benefit of the reduction in his premiums as tax-free income.
But if the employee’s portion becomes tax deductible, the employer might decide to raise the employee’s salary $5,000 and make the entire premium payable by the employee. This benefits the employer slightly the first year because of reduced administrative expense but gives the employer a definite advantage in flexibility in later years – the employer might not choose to increase salary by as much as the increase in insurance costs, for example. Or married employees may opt out of one employer’s health insurance because the spouse’s plan is better – which could I guess lead to companies deliberating providing poor plans so employees who can would make this choice.
I suspect that this practice of “I’ll just pay you more and you pay your entire health insurance premium” would be frowned on by the ACA, but isn’t part of Trump’s proposal the repeal of the ACA?
Yes number 1 is repeal ACA.
He wants all individual healthcare premiums to be tax deductible.
Also since he will stop illegal immigration that will magically lower healthcare costs. I never claimed it was a good plan I just wanted to know the cost of the few quantifiable parts of his plan.
ETA to clear up he doesn’t say all healthcare expense should be deductable, only premiums. However whatever you put in a HSA will be before taxes.
It also seems contingent on making enough to pay federal income tax. If you’re not paying, there’s nothing from which to deduct.
It’s tricky to work out all the incentives/side effects on insurance and healthcare markets if you look at that one piece alone. It was always a component of what I thought was best (along with making employer contributions taxable income in a revenue neutral way). That’s wayyyyyy outside the scope of this thread and I brain dumped big pieces post-ACA.
Still the HSA linked high deductible plans are, IMO, can be a great choice under ACA if you’re at or below the average healthcare spending and you aren’t risk averse.
Why would that be a problem for the ACA? The whole point is to give people options who either don’t have employer health care or who have crappy employer health care.
Yes. I meant to add that in, too, but didn’t.
Or… even if you are making enough to pay Federal income tax the amount of your premiums may still significantly exceed the amount of your taxes.
Basically, this benefits the middle-class and higher (with the healthiest, with lower premiums, benefiting the most) and leaves anyone below that screwed.