Americans must pay a fair price for health care reform

Hit hard by the recession, Americans have learned a lesson about over-spending and don’t want to see their government make the same mistakes they’ve made. In a new Kaiser Family Foundation poll, only four in ten people are willing to pay more for universal health care coverage, although a significant majority of people want it. This discrepancy is explained by the fact that six in ten people think reform can be achieved without spending more money. Obviously they believe that there is waste in the system that can be gutted out before any more money is spent.

For Obama to get a serious plan for health reform past the anticipated ugly media campaigns of his opponents: business, the health care industry and the right-wing, he must forge a plan that covers a vast majority of the 47 million uninsured, while at the same time, doesn't cost the average American much money. Sounds like a tall order, right?

There are definitely ways to reduce costs in the current system, but there are also changes that can be made to the tax code that could be more fair (i.e. more progressive) and that could provide more money for health care coverage.

The Washington D.C. based Center on Budget and Policy Priorities recommends two such changes. The first, limiting the tax exclusion for employer-sponsored insurance, is supported by a chief Senate health policy maker, Max Baucus, (D-MT). It would allow the workplace health insurance plans of the highest wage earners to be taxed. Right now, these plans are a huge exception to the rule of taxing all employer compensation, in fact, the CBPP calls this exemption “the largest single subsidy in the tax code.”

Eliminating this exemption is additionally attractive since it packs a big punch. The potential revenue from this source beats any other idea currently being floated in Congress.

Another of Obama’s proposals supported by the CBPP is making itemized deduction levels more equitable. Under current law, federal tax rates for high-earners will increase to 36 and 39.6 percent in 2011, increasing the amount of tax deduction the wealthy will receive.

In a real-world description of this tax's impact, this means that if a teacher in the 15 percent tax bracket and an executive in the 36 percent bracket both donate $100 to their favorite charity, the teacher will receive a tax refund of $15 on the donation, while the executive will receive $36 back. This hardly seems fair.

Obama’s proposal, to limit itemized deductions to 28 percent, has raised quite a bit of opposition. The CBPP suggests that a more feasible alternative might be to maintain the status quo, with deduction levels staying as they are when tax rates rise in 2011. This option could raise $68 billion over ten years.

Tax policy may not be very sexy stuff, but it’s going to take a whole raft of revenue sources and cost savings to be able to provide all Americans with the health coverage that they deserve, and in the process, we may straighten out some of the more unfair tax policies that the U.S. has on the books.