Setting the Record Straight: President Bush's Standard Deduction for Health Insurance Would Save Money for More Than 100 Million Americans

"So in my State of the Union Address next Tuesday, I will propose a tax reform designed to help make basic private health insurance more affordable – whether you get it through your job or on your own."

– President George W. Bush, 1/20/07

Senate Democrats: "President Bush's Health Insurance Proposal Amounts To A Tax Hike For The Middle Class." (Press Release, Senate Democratic Communications Center, 1/22/07)

• Under President Bush's Proposed Standard Deduction For Health Insurance, More Than 100 Million Americans Who Now Get Health Insurance Through An Employer Would Save Money.

• President Bush's Proposed Standard Deduction For Health Insurance Would Lower Taxes For The Middle Class. The standard deduction for health insurance would be like the standard deduction for dependents. This proposal will result in lower taxes for about 80 percent of employer-provided policies. Those with more generous policies (20 percent) will have the option to adjust their compensation to have lower premiums and higher wages to offset the tax change. In the aggregate, this results in a tax cut for the middle class. For example:

• • Under The President's Proposed Standard Deduction For Health Insurance, A Family Of Four With Annual Income Of $60,000 And Employer-Provided Health Insurance Would Save $424 In Taxes.

  • Under The President's Proposed Standard Deduction For Health Insurance, An Uninsured Family Of Four With Income Of $60,000 Who Chose To Purchase Health Insurance Would Receive A $4,545 Tax Break. In 2009, the President's proposal would reduce the after-tax cost of the average-priced policy by 75 percent – from $6,100 to $1,555.

  • • If This Same Family Bought A Basic Insurance Policy With A $4,700 Premium, They Would Receive The Same $4,545 Tax Break, And They Would Pay Only $155 After Taxes For Basic Health Insurance.

• All Americans Who Now Buy Health Insurance On Their Own (Rather Than Through Their Employers) Would Pay Lower Taxes. The average tax bill for this group would decline by $3,650 in 2009.

• All Uninsured Americans Who Purchase Health Insurance Would Pay Lower Taxes. The President's proposal will lower the average tax bill of a family without health insurance by $3,350 in 2009.

Senate Democrats: The President's Proposal Will Not "Encourage The Uninsured To Purchase Health Coverage On Their Own."

• The President's Proposal Will Make Health Insurance More Affordable For Americans Who Are Now Uninsured. Uninsured Americans who purchase health insurance would receive significant tax relief as a result of the President's proposal. This will provide a significant incentive to all working Americans to purchase insurance coverage, thereby reducing the number of uninsured Americans.

Senate Democrats: "The Nation's Health Insurance Crisis Has Worsened."

• The President Pushed For Health Savings Accounts (HSAs) In Part To Address High Insurance Costs And To Reduce The Number Of Uninsured. To further lower health care costs, the President has proposed Association Health Plans (AHPs) and medical liability reforms, and implemented policies to encourage health information technology and price transparency.