Wow. So here?s a piece going into how Mitt Romney and Paul Ryan want to take on tax breaks as part of their big budget-busting plan. Neither has been specific; writer Nicole Gelinas makes some helpful suggestions for them:
Between 2010 and 2014, according to Congress?s Joint Committee on Taxation, the federal government will spend $659.4 billion on allowing employers to pay for their employees? health insurance with pretax income and $484.1 billion on allowing homeowners to deduct their mortgage-interest costs from their income. These are the two biggest tax breaks for individual filers (the first of the two counts as an individual break, not a corporate one, because it benefits individual people).
If Romney and Ryan are looking for tax breaks that ?distort economic growth,? they don?t have to look far beyond these two items. Employers? paying for workers? health care out of money that they would otherwise pay in salary makes it impossible to create a real market for individual health insurance. Only when the majority of working Americans see how much health insurance actually costs for the little that they get, and stop thinking of it as a perk of working for the Man, will we finally see real health-care reform. The result would be a system in which people used their own money to buy health care on an open market, just as they buy almost everything else. (Congress would still have to take some protective measures, such as outlawing price discrimination?a doctor?s or hospital?s charging different prices for customers depending on their insurance profiles.)
The mortgage-interest deduction also distorts the American economy. Between 2000 and 2007, mortgage debt doubled, and the government subsidized much of that borrowing. People could buy houses that they couldn?t afford and justify the purchases by saying they were lowering their taxes. Washington?s treatment of mortgages has created a vicious cycle, with cheap debt pushing up house prices and requiring still more cheap debt to fund home purchases.
Romney and Ryan should pledge to free Americans from these Washington-devised traps.
Uh, except those ?Washington-devised? traps actually aid a middle class that?s currently treading water.
Indeed, if this were the way Romney/Ryan would proceed ? then it?s absolutely correct to say that their tax plan would crush the middle class.
Eliminating the pre-tax deduction for employers virtually guarantees that fewer employers will pay for health care benefits, because it will cost them more. But maybe they?ll just turn around and give their employees (in additional salary) the entirety of what they would have paid for health care. Or maybe they won?t.
And this then becomes a way that we transition to a new, ?market-driven? health care system where you pay directly for your care. Which you desperately hopes costs less than what that care does now, because now, you couldn?t afford care.
The assumption behind this ?market market market!? approach is that, removing the tax incentive for employers to provide coverage will force individual to become careful shoppers for their health care needs. Consumers will weigh plans by various providers, choosing the best deal; and providers will compete compete compete for consumers, driving down prices to entice buyers.
At least, that?s the way it works in Fairy Free Market Land.
Down here in reality, health care providers have tremendous sunk costs. As in, look at Lancaster General?s facilities around town. You think they?re going to recoup those costs by charging you the $99 special? Think again.
Sure, Fly-By-Nite Doctors.com might set up shop in your town ? I?m sure the guy who graduated at the bottom of his medical school class would be more than willing to do your open-heart surgery for a comparative pittance. Step right up.
And anyway, the health care market isn?t like other markets, because most of the time you don?t ?choose? to buy health care, you need it because you?re sick or injured. When you need it you need it right now, as opposed to a new laptop, where you can wait until it goes on sale. And by eliminating the pre-tax deduction for employers, you?re essentially ensuring that Americans get less health care. Maybe that?s good ? some of the health care we get now is unnecessary. Some of it, on the other hand, is of the utmost necessity. And if you think medical bankruptcies are all too common now ? just wait.
The second item, the mortgage deduction, may indeed distort the economy, although the idea that this deduction was a big reason for the housing bubble doesn?t really hold water, because the deduction predates the bubble. It?s been around in some shape or form since 1913.
But it does make homes more affordable ? which really isn?t an issue for the Mitt Romneys of the world. For the guy down the street whose modest dream was to own his own home, even if it?s a 50-year-old 2-bedroom rancher ? yeah, it?s a big deal. And if it were to suddenly go away, the guy down the street will see his tax bill rise. So will Romney ? but Romney can afford it.
And if this has the ultimate effect of pushing home prices down even further, then everyone who owns a home suffers as the value of his/her largest asset drops.
Romney and Ryan might not target these tax breaks, as suggested in the piece. In fact, it?d be pretty suicidal for them to do so. But who knows? Ryan in particular seems bend on a kamikaze mission from God. Because the Lord ? and tax policy ? must help those who help themselves.
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A 1985 graduate of Manheim Township High School and a 1989 graduate of La Roche College in surburban Pittsburgh, Gil Smart began his journalism career with Gateway Publications in Pittsburgh, and came to the Sunday News in 1994. He was named Sunday News Assistant News Editor in 1996, and Associate Editor in 2006. His column "Smart Remarks" has appeared in the Sunday News since 1998.geraldo obama trayvon martin pietrus cheney tori spelling marion barber marion barber
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