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Friday, October 03, 2008

McCain's $5,000 Medical Credit....NOT!!

This is one area, I have literally talked about till I'm blue in the face. People hear "woohoo, I'm going to get a $5,000 credit on my taxes!" and they are sold. Please, please understand - the odds of getting a full $5K credit are slim.

I have been doing taxes for over 30 years and have seen how people are "let down" when credit promises are never what they thought. I will try to make it simple.

Your employer pays $800/mo in health insurance for you which equals $9600.
Assume you have taxable income of $50,000 - now add this $9600 to your taxable income. Please keep in mind that an amount this large, more than likely moves your tax bracket up - let's say 28% now. That would be an additional $2688 in taxes (also, there would be no Federal withholding on this additional taxable income.) Thusly, you are now paying more "out of pocket" for the tax liability.

In one scenario it is possible that because of your income level (higher) you may face phaseouts in exemptions. Knowing how the IRS likes to structure their credits - I am sure that you would have to be in the very low income levels to get a full $5K credit, and as your income increases - this credit too, would phase out...and you would be left with paying taxes on this additional income with NO safety net. THIS IS THE WORST PROPOSAL FOR TAXPAYERS!! Oh, and let's not forget the tax liability on a state level - McCain cannot guarantee a credit there, that would have to be legislated through the individual states. Also, I was being generous in stating a figure of $800/mo for insurance...the way the industry changes (daily) that figure could be MUCH higher.

Don't be fooled by the smiling Wasilla wench. I'm sure she only parrots the words, and has no idea of how the process works.

I'll be back later - watching the House on CSpan - we'll see how they handle this rescue package. Boehner & Blunt (nice name for a candy bar), are again screaming for passage - we'll see if they get mud in their faces this time!! they are getting their PORK - who could ask for anything more!?!?


Anonymous said...

Great point! It's a back door hike in the long run. It will simply add to insurance company profits.

arrozconpollo said...

Biden destroyed her on the health care portion. Sure, he was full of numbers, but $5000 vs. $12,000 is something even "joe six-pack" can understand. Unfortunately for Palin, she's only above to speak in sweeping generalities.

Disregard the right wing pundits on this debate. Palin got destroyed.

Mnmom said...

Of course the right wing talking heads will praise her, what else can they do?

I thought she was lame - all talk, all rhetoric, all hyperbole, no substance.

It's really said that folks consider her debate performance a "success" if she didn't self destruct. That's a mighty low bar for a VP candidate.