Melding Health Overhaul and Taxes Gets Complicated

President Barack Obama’s health care law uses the tax system to subsidize coverage for the uninsured.

Promoting social policy goals through the tax code is a time-honored strategy for both political parties.

For example, the nation’s main anti-poverty program, the Earned Income Tax Credit, uses the tax system to supplement the earnings of low-income families.

But melding insurance and taxes — two of the most complicated topics for consumers — won’t be easy.

Some pros and cons:

PRO: Could build support for the health overhaul because tax credits have greater political popularity than traditional government spending programs.

CON: Complicates tax filing for many lower-to-middle income people, who may not be able to afford tax-preparation services.

PRO: Avoids the social stigma associated with safety-net programs.

CON: Requires people who get the health insurance tax credits to accurately project their incomes for the coming year, a real challenge for those who may not have stable employment.

PRO: The Internal Revenue Service has a lot of experience administering tax provisions that serve a social policy agenda, from mortgage deductions to child care tax credits.

CON: It strains the agency when an estimated $385 billion a year in taxes owed, or more, goes uncollected.

Source Link