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HEHS-00-104R 1 (2000-04-21)

handle is hein.gao/gaobaalor0001 and id is 1 raw text is: I GAO Accountability * Integrity * Reliability United States General Accounting Office Health, Education, and Washington, DC 20548 Human Services Division B-285141 April 21, 2000 The Honorable Charles B. Rangel Ranking Minority Member Committee on Ways and Means House of Representatives Subject: Private Health Insurance: Potential Tax Benefit of a Health Insurance Deduction Proposed in HR. 2990 Dear Mr. Rangel: Despite a strong economy, the number of nonelderly Americans without health insurance increased from about 39 million in 1994 to nearly 44 million in 1998, the latest year for which comprehensive data are available. A number of legislative proposals focus on reducing the number of uninsured and on addressing concerns about the equity of tax law as it relates to health insurance. Some of these proposals would expand the tax advantages associated with individually purchased health insurance by allowing individuals who buy health insurance either to receive a tax credit that reduces the amount of taxes they owe or to deduct the premiums they pay from their taxable income. Previously, we reported that tax credits and deductions differ with respect to who would be eligible and the amount of tax subsidy individuals would receive.1 A tax credit typically results in the same tax benefit regardless of marginal tax rate, although the credit may be available only for individuals below a certain level of taxable income. In contrast, the value of a tax deduction is directly proportionate to marginal tax rates, so that individuals in higher tax brackets receive a larger tax advantage than those in lower tax brackets. This letter responds to your request for information on the potential tax benefit that individuals could receive if a tax 1See Private Health Insurance: Estimates of Expanded Tax Deductibility of Premiums for Individually Purchased Health Insurance (GAO/HEHS-98-190R, June 10, 1998); Private Health Insurance: Estimates of a Proposed Health Insurance Tax Credit for Those Who Buy Individual Health Insurance (GAO/HEHS-98-221R, July 22, 1998); and Private Health Insurance: Estimates of Effects of Health Insurance Tax Credits and Deductions as Proposed in HR. 2261 (GAO/HEHS-99-188R, Sept. 13, 1999). GAO/HEHS-00-104R Proposed Health Insurance Tax Deduction

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