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The $1.3 Trillion Question: Does McCain Raise Taxes On Health Insurance?

By Guest Contributor on July 31, 2008 at 3:00 pm

"The $1.3 Trillion Question: Does McCain Raise Taxes On Health Insurance?"

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Our guest bloggers are James Kvaal and Robert Gordon, Senior Fellows at the Center for American Progress Action Fund.

Sen. John McCain had a read-my-lips moment on taxes yesterday, telling a town hall meeting that “I want to look you in the eye: I will not raise your taxes nor support a tax increase. I will not do it.”

Of course, only three days earlier, McCain said that higher taxes were “on the table” to solve Social Security. And he seemed to say the same to a group of donors last night. ThinkProgress has more of McCain’s muddled history on Social Security taxes.

Here’s another place where John McCain may be willing to raise your taxes: to pay for his enormous health care plan.

McCain has proposed new health insurance tax credits, which his campaign estimates to cost $3.6 trillion over the decade. He says he pays for it by taxing workers’ health benefits, which are largely tax-free today. McCain aides say the plan has no net cost and left it out of their budget plan.

McCain’s numbers add up only by raising taxes on middle-class families. To raise $3.6 trillion by taxing health benefits, you need both income and payroll taxes. But that means an $1,100 tax increase on a typical married couple earning $60,000 in 2013.

Alternatively, McCain could avoid tax increases by applying only income taxes – but not payroll taxes – to health benefits. And this is what his spokesman told the Daily Tax Report he does. But income taxes alone fall $1.3 trillion short of paying for his tax credits.

McCain aides say they pay for their health care plan without raising middle-class taxes, but that’s not possible. So which is it? Do they raise taxes on ordinary families by more than a thousand dollars or add $1.3 trillion to the deficit? It may be the biggest unanswered question in the candidates’ fiscal policies.

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