Firefighters Whack McCain for Taxing Benefits

By Hope Ditto

Oct 21, 2008 12:50pm

ABC News’ Teddy Davis and Hope Ditto Report:

Picking up on an argument that the Obama campaign has hammered in its own ads, the International Association of Fire Fighters launched an ad in six states on Tuesday which criticizes John McCain for proposing to end an employee’s ability to deduct the cost of health benefits from income taxes. 

Watch the firefighter ad HERE.

The ad will air in six battleground states: Florida, Missouri, New Hampshire, North Carolina, Ohio and Virginia. The versions of the ad that will appear in New Hampshire and North Carolina will link Republican Senators John Sununu and Elizabeth Dole, both of whom are in tough fights for re-election, to McCain.

The firefighters leave out that McCain would replace the current deductibility of employer provided health plans with an across-the-board refundable tax credit of $2,500 per individual or $5,000 per family.

At first, most Americans would be better off with the tax credit from a strictly tax standpoint, according to the non-partisan Tax Policy Center. McCain’s plan would also provide subsidies to people who do not currently get subsidized because they do not have employer-provided health care but rather purchase it on their own. Lastly, the McCain tax credit – since it is flat – changes the current situation in which the largest tax subsidy flows to workers with the highest income and the most generous health plans.

While the firefighters skirt some details of the McCain plan, experts believe that McCain’s plan could encourage a movement away from employer provided plans that have more risk sharing, putting more people in the individual market where there is no protection for people with pre-existing conditions. The McCain tax credit could also become a worse deal over time since it would grow with generalized inflation rather than with health-care costs which are rising faster.

McCain says he would work with the governors to create high-risk pools for people with pre-existing conditions. But he has not proposed specific funding commensurate with the anticipated need.

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