Snake oil?

President-wannabe John McCain’s “solution” to the escalating price of health care is to give each family a tax credit of $5,000. The Republican Senator argues that families could then use that $5,000 to “shop around in the free market” for lower-priced health care insurance, thereby giving families “control” over their own health care.

Using the 2007 federal income tax rates (10 percent of the amount from $1 to $15,650 and 15 percent of the amount from $15,651 to $63,700), a family’s adjusted gross income (AGI) would have to be $38,550 or more for them to have a total federal income tax liability of at least $5,000: 0.10 x $15,650 + 0.15 x $22,900 = $5,000. Let’s consider a family of four (mom, pop and two children). This family would claim four exemptions at $3,400 each, and, assuming a filing status of married, filing jointly, their standard deduction would be $10,700. Their gross income would be $38,550 + 4 x $3,400 + $10,700 = $62,850.

Therefore, any family of four with an annual gross income of less than $62,850 would get a McCain tax credit of less than $5,000. According to the U.S. Census Bureau, the median household income for a family of four in West Virginia is about $55,920, which means that more than half the families of four in West Virginia would receive a tax credit of less than $5,000 under Senator McCain’s proposal.

The average annual premium for family health care coverage is a little more than $12,000. Senator McCain wants to give less than half the families of four in West Virginia $5,000 with which to “shop around.” To the majority of families of four (probably the very families who are either uninsured or underinsured), he’d give even less than $5,000. Does anybody really believe that he or she could purchase suitable family health insurance with that?

Remember in November!