Information and Resources

Bush: Tax & State Help for Uninsured

Jan. 24, 2007 -- President Bush formally unveiled a pair of health initiatives during his State of the Union address Tuesday night aimed at expanding Americans’ access to health coverage.

Bush called for changes in the tax code that would make it easier for families and individuals to buy coverage on the individual market rather than receiving it through an employer.

He also said Congress should send grants to states that pass policies expanding insurance coverage, as Massachusetts and several others have done.

The speech, delivered to a Democrat-controlled Congress for the first time in Bush’s presidency, was his broadest attempt yet to address rising health costs and the 47 million Americans who now lack health insurance.

But the plan quickly met strong opposition from key Democrats and unease from some Republicans, throwing into question whether Bush will be able to convince lawmakers to follow the proposal before he leaves office in early 2009.

Changing Taxes on Coverage

The first part of the proposal would, for the first time, tax health benefits received through an employer.

At the same time, it allows tax deductions for the first $7,500 in health coverage expenses for individuals and the first $15,000 for families, regardless of where they get their insurance.

The plan in effect would deliver a tax break to anyone who purchases coverage on the individual market, while for the first time raising taxes on others whose workplace health benefits exceed certain caps.

Health premiums now cost $11,500 per year for the average family of four and $5,200 for the average individual, according to federal figures.

In briefings earlier this week, administration officials estimated Bush's plan would result in a tax cut for roughly 80% of those with insurance and an increase for the other 20%.

Democrats attacked those figures as unrealistically optimistic.

But Bush said the plan would for the first time level the playing field for workers trying to buy their own coverage on the expensive individual insurance market.

“This deduction would help put a basic private health insurance plan within their reach. Changing the tax code is a vital and necessary step to making health care affordable for more Americans,” Bush said.

The White House estimated the plan would expand coverage to 3 more million people.