Tax Policy Center Newsletter
October 19, 2007

Tax Code and Health Insurance Coverage
Testimony Before the House Budget Committee
Leonard Burman

In this testimony Burman argues that there are limitations to using tax credits to expand health insurance coverage. A program of health insurance tax credits combined with reforms of the market for nongroup health insurance could significantly expand coverage, but at a very high cost. The testimony summarizes the current tax treatment of health insurance, the effects of tax subsidies on coverage and health care costs, and discusses the ways that tax credits might affect health coverage. Burman suggests that the most cost-effective approach to expanding health insurance coverage may not be a tax subsidy at all, but an expansion of an existing public program, such as Medicaid, S-CHIP, or Medicare.

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Can the President's Health Care Tax Proposal Serve as an Effective Substitute for SCHIP Expansion?
Linda Blumberg

The Bush Administration has proposed using a tax deduction approach to expand health insurance coverage instead of expanding SCHIP coverage to more children. On October 3, the president vetoed the SCHIP reauthorization bill passed by Congress. This brief compares the financial burden on families associated with purchasing coverage for their children under the President's proposal and under the SCHIP reauthorization bill and discusses the likely impacts on uninsurance among children. Blumberg finds that the financial burdens for families with incomes between 150 and 300 percent of the federal poverty level would be much higher under the tax deduction approach than under SCHIP.

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SCHIP: Is Increasing The Tobacco Tax To Expand Coverage A Good Idea?
Leonard Burman, Kim Rueben, and Genevieve Kenney.

The original state children's health insurance program (SCHIP) was financed by an increase in the federal excise tax on cigarettes. President Bush vetoed legislation passed by the House to renew and expand SCHIP and increase the federal tax to 84 cents per pack because it "clearly favors government-run health care over private health insurance," but he also objects to the financing method, which he calls "a massive, regressive tax increase." While the president is correct that tobacco excise taxes are regressive, the package as a whole benefits low-income families with children and is, on balance, progressive. Published on HealthAffairs.org.

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