Well, this will get people's attention - and bring out the crazies from all angles.
Jonathan Weisman and Jeffrey H. Birnbaum of the Washington Post report today that:
The Bush administration is eyeing an overhaul of the tax code that would drastically cut, if not eliminate, taxes on savings and investment ... the administration plans to push major amendments that would shield interest, dividends and capitals gains from taxation, expand tax breaks for business investment ...
... administration officials have begun dialing back expectations that they will move to scrap the current graduated income tax for another system.
Instead the administration plans to push major amendments that would shield interest, dividends and capitals gains from taxation, expand tax breaks for business investment and take other steps intended to simplify the system and encourage economic growth, according to several people who are advising the White House or are familiar with the deliberations.
The changes are meant to be revenue-neutral. To pay for them, the administration is considering eliminating the deduction of state and local taxes on federal income tax returns and scrapping the business tax deduction for employer-provided health insurance ...
Did you catch that last part? Scrapping the business tax deduction for employer-provided health insurance?
Well, we knew the President was interested in going beyond more tax cuts and toward even more fundamental change. And most had assumed that, given the record, nobody would be too concerned about revenue neutrality. But here we have it. Where does the balancing act come from?
Tax deductibility of state and local income taxes. That would have a big and nasty effect in New York. I presume that some of the changes in the other direction would too, but have no idea how much.
But dropping deductibility of health benefits would not ripple into the health care system. It would gush into it. And the politics of this will be brutal. I'm already expecting the worst of most everyone involved in this fight.
Note what's missing. Instead of including health benefits as taxable compensation to the employee (we should have done it 25-30 years ago, but it would have been a brawl even then) they would scrap the deduction on the employer side. It would make the system symetrical, but it would instantly bump the tax obligations of employers that provide coverage, making this already high expense even higher. Presumably, this added expense would be offset somewhere, but it would certainly reduce the employer's incentive to provide coverage in the manner they do today.
It's well after midnight and so, despite my impulses, I'm not going to comment further now. Because I'm not going to instantly and automatically rage against the idea, I just know I'd get into trouble.
And speaking of trouble, why didn't the President mention this during the campaign?