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1 Robert Carroll, McCain's Health Credit: The Intersection of Health Policy and Tax Policy 1 (2008)

handle is hein.taxfoundation/ffbeexz0001 and id is 1 raw text is: FOUNDATION September 2008 No. 144 FISCAL FACT McCain's Health Credit: The Intersection of Health Policy and Tax Policy By Robert Carroll Both candidates for President have spoken a great deal about the nation's health care system, focusing on high costs and the large number who go without health insurance coverage. Health care costs continue to rise more rapidly than incomes, and the number of adults without health insurance persists at roughly 45 million. But while Senators Obama and McCain may agree on the problem, they propose very different solutions. Senator Obama has focused his policy on increasing the government's role in the nation's health care system. In contrast, Senator McCain proposes to improve today's private health care markets by reducing the imbalances that arise from the tax treatment of health care. Specifically, he takes aim at the substantial tax subsidy the federal government has provided for employer-based health insurance since World War II. This tax subsidy, at roughly $300 billion to $400 billion per year, is the single largest tax preference in the tax code today, ahead of even the political third rail of the home mortgage deduction.1 What may be particularly surprising to some is that despite this enormous tax subsidy, we still have the dual, but related problems of high cost growth and a large segment of the population without any health insurance. Indeed, some have suggested that the tax subsidy may be at least partly responsible for these problems.2 Replacing a Tax Exclusion with a Refundable Tax Credit Although Senator McCain's health care plan has other provisions-changes to insurance regulation, expanded health savings accounts, and a new purchasing pool for people with

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