Sometimes, even Factcheck.org gets it wrong (sort of)

By and large, I tend to rely on the non-partisan website Factcheck.org to verify or debunk the various claims raised by both sides in the presidential election.  And they tend to do a pretty good job of backing up their analyses.

However, in a recent posting analyzing the candidates' statements regarding the other's health insurance plan, Factcheck seems to miss the forest for the trees.

In its article, Factcheck tries to debunk the Obama campaign's assertion that the McCain health insurance plan will lead to the largest middle-class tax hike in history.  Frankly, I have no idea (and Factcheck makes no effort to explain) what would constitute the largest middle-class tax hike in history.

In order to go further, a brief primer is required.  John McCain's health insurance plan has two principal tax-related components.  First, if your employer provides health insurance, you will be taxed on that amount.  Currently, such employer-provided insurance is not considered taxable income.  Under McCain, you will suddenly be hit with a higher tax withholding from your paycheck.

Second, McCain will provide a tax credit of $2,500 for individuals, and $5,000 for families (regardless of size or needs).  Supposedly, you will be able to direct the government to send the credit directly to the insurer.  How, exactly, that might work in the context of tax credit remains a mystery, since tax credits are offset by tax liabilities on your return.  It seems possible that you could end up losing the benefit of the tax credit in the maw of other taxes, in which case you're SOL.

But in any event, follow this likely scenario:  Health insurance costs, on average, about $12,000 per year for a family (and I've rounded down - it's actually a bit higher).  Under McCain, you'll have to pay taxes on that.  Assuming a low tax bracket of 25%, you'll owe $3,000 in taxes that you would not otherwise owe.  Over 12 months, that $3,000 translates into taking home $250 less each month.  Pause, and ask yourself, can you afford to reduce your monthly pay by $250 a month?

The tax credit, meanwhile, goes directly to the insurer.  However, Factcheck does a calculation that would result in your having $2,000 left over to invest in a health savings plan or to spend on other health care.  Of course, that's impossible, because the tax credit goes directly to the insurer. You will never see it, and thus will never be able to otherwise use the funds.  (Presumably, Factcheck assumes that you will be entitled to a full refund and that the leftover credits will come to you on April 15). 

However, if you end up owing taxes at year end, your owed taxes will be offset against the tax credit, resulting in a reduced (or potentially eliminated) tax credit.  So at the end of the day, what are you left with?  Less money, higher taxes, and the same health coverage you already have.

Even if you do get a full refund, you are still left with less money each month, higher taxes, and the same health coverage you already have, with the added bonus of having given the government a $2,000 interest-free loan for a year.

Lastly, bear in mind that this all assumes an employer does not discontinue providing health insurance.  Because of the alterations the McCain proposal would cause to risk-pool insurance, experts note that within a handful of years after the plan is implemented, employers would begin dropping employee health coverage altogether.

What that would mean is you have to go into the market to buy your own insurance.  At $12,000 a year, you will have to pay $1,000 per month out of pocket.  Even deducting the $5,000 credit, you still pay $583 per month out of pocket.  Again, do you have an extra $1,000 per month?  How about an extra $583 per month?

What Factcheck then overlooks in its analysis is that, while the direct tax increase may not be the largest in history, the drain on middle-class disposable income may very well be, and may result in an economic disaster the likes of which (even today) we have never seen.

For another good take on the two health insurance plans being proposed by the candidates, this article at the Health Business Blog is a good read..

Who Ya Gonna Tax? BIG OIL!

A funny thing happened on the way to the gas station today - Big Oil made more money. I'd sure like some that.

As it turns out, I'm likely to get my wish regardless of who is elected President.

Barack Obama wants to institute a "windfall profits tax" on the oil companies. I don't know what constitutes a "windfall" profit as opposed to a regular, or even large, profit. But he wants to send me a check with the money he takes from the oil companies, who I am sure won't miss it.

But, like with almost everything Obama discusses so far, it's pretty words and happy talk - good speech, no action - at least not yet.

On the other hand, Sarah Palin, the GOP's veep nominee, has already played the roll of Robin Hood. In Alaska, Palin seriously jacked taxes for the oil companies doing business in her state, then distributed the money to the people in the form of $1,200.00 rebate checks. Presumably, that also made it easier to manage the state's budget.

So I guess Obama and Palin aren't so different after all. Because I am certain that Palin's Great Alaskan Handout was not overt political pandering, but rather epitomizes her strongly-held conviction that it is her role to ensure government takes what it needs from big oil (or big business for that matter) and redistribute some to the masses while keeping the rest for itself.

Balanced budgets are just around the corner!

Bush's economic genius on display

Sometimes I can only scratch my head and wonder. I mean, it's easy to make snide remarks about George W. Bush's stupidity in regard to virtually any subject. But sometimes the depth of that stupidity just goes beyond description. For example:

Today in a press conference Bush indicated that he was unaware that gasoline was projected to reach $4.00-per-gallon by the spring. Set aside for a moment the potential diatribe about how that's possible, and move on to the next comment.

Apparently, the solution to $4.00-per-gallon gasoline is to make his tax cut permanent. Again, set aside the potential diatribe about the merits of the tax cut and who it benefits, etc.

No, instead focus on this - the solution to $4.00-per-gallon gas is to maintain the status quo vis-a-vis taxes, during which status quo gas will hit $4.00-per-gallon. In other words, do nothing. Gas will hit $4.00 while the tax cut is in place. How, then, does continuing the tax cut help? Bush's theory is that it would be worse if taxes went up in a couple years, then, boy-howdy, wouldn't $4.00-per-gallon gas suck.

Newsflash Mr. President, $4.00 is unacceptable and unaffordable now, with the tax cut in place. Making the tax cut permanent will not alleviate the suffering caused by $4.00 gas. And I don't think anyone is worried that, gee, taxes might go up in a couple of years (which, by the way, they will - but that inevitability is a topic for another day). No, in a couple years we'll be worried about $6.00-$7.00 gas.

I seriously wonder whether we can even survive another 10 months of this clown.

Tax rebate - not really.

By now you've heard that the feds are going to be giving out a "tax rebate" as part of a poorly-conceived economic stimulus plan designed to jump-start the failing economy. Ignoring for a moment the stupidy of the rebate program generally, it turns out that it's not what the gov't and media have made it out to be.

Media reports all state that taxpayers will receive $600 rebates ($1,200 for couples who filed jointly) and $300 for people who didn't have any tax liability. Sounds pretty sweet, right?

Not so fast. First, in order to get your rebate you must file your 2007 tax return. So much for just sending a check. But that's not really such a big deal - you have to file your return anyway, so no big deal.

However, in order to get your rebate check, you have to either owe nothing or get a refund on your 2007 taxes. So, if you file single and end up owing $100, then your rebate check will be $500. If you owe $1,000, then you'll simply get a credit of $600 and still owe $400. And of course is you have an outstanding prior tax liability, it will be reduced by $600.

Now, there is an certain logic to the idea that the government should not hand out money to people who owe it money. However, the purported purpose of the plan is to stimulate the economy by giving people cash to inject into the pipeline - in other words, to go shopping. Not to give taxpayers a bonus, but to move products, increase spending and hopefully kick start the economy overall. It's a stupid idea and won't work, but if program's instigators truly believed in the goal, wouldn't they have made sure that the gov't kept its hands off the money in order to ensure a maximum economic bump? How does paying the IRS stimulate the economy?

There is nothing worse than a bad idea poorly executed. And while I would love to lay this on top of the stack of other poorly-executed bad ideas by Bush, this is truly a bi-partisian effort. Everybody is guilty. Worse, the media have utterly failed to investigate these details, and I assure you that you will not read or hear a news story about the IRS intercepting rebates until the checks start going out and people start bitching about not getting their's. Way to be on top of the news, guys.