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Bush to float health insurance tax break
yahoo (via AP) ^ | 1/20/2007 | DEB RIECHMANN

Posted on 01/20/2007 8:18:47 AM PST by PtrainerNYC

WASHINGTON - President Bush will propose in his State of the Union address a tax break for people who buy their own health insurance and a limit on how much coverage individuals can receive tax free at work. ADVERTISEMENT

The proposal to be announced Tuesday offers a tax deduction to people who purchase coverage and urges those with generous plans to either embrace cheaper insurance or pay taxes on part of it, according to a Bush administration official familiar with the proposals.

If passed by Congress, the plan would be the first time that workers could get a tax break for buying their own insurance. At the same time, it would be the first time that some employer-provided health care benefits could be taxed.


TOPICS: News/Current Events
KEYWORDS: healthinsurance
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To: sitetest

The Sub-S stuff was new for 2006. My boss was pissed. The $10K that we paid in premiums was taxable this year. Not FICA taxable, just federal and state.


51 posted on 01/20/2007 10:03:31 AM PST by flynmudd (Proud Navy Mom to OSSA Blalock-DDG 61)
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To: XRdsRev

Dear XRdsRev,

"I am in a 'temporary' job 42+ hours per week, 52 weeks a year. My position is expected to last for 7-8 years. No health care, no vacation, no pension, no sick days...nothing."

Having lived here since 1966 (when my father took a government job), and having done federal contracting for most of the last 15 years, I've only known two other folks with one of those "temporary" positions.

It seems to me that the trend for the government is to outsource that kind of thing. Makes it easy to get rid of folks they don't like.


sitetest


52 posted on 01/20/2007 10:05:05 AM PST by sitetest (If Roe is not overturned, no unborn child will ever be protected in law.)
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To: sitetest

Technically I am an intermittant Federal employee but I am one of those who fall into the position of working a regular full time position while being officially categorized as intermittant.

Not getting paid benefits is something I understand, I knew that when I signed on. Not being able to buy into the Federal plan with my own money is something that really stinks though.


53 posted on 01/20/2007 10:10:44 AM PST by XRdsRev (The Democrat Party - Keeping Black folks on the "Plantation" since 1790)
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To: flynmudd

Dear flynmudd,

Really??

Hmmm...

I just checked the IRS rules for 2006, and here's a quote:



Health Insurance Costs for Self-Employed Persons
If you were self-employed and had a net profit for the year, were a general partner (or a limited partner receiving guaranteed payments), or received wages from an S corporation in which you were a more than 2% shareholder (who is treated as a partner), you may be able to deduct, as an adjustment to income, all of the amount paid for medical and qualified long-term care insurance on behalf of yourself, your spouse, and dependents.

The insurance plan must be established under your trade or business, and you cannot take this deduction to the extent that the amount of the deduction is more than your earned income from that trade or business.

You cannot take this deduction for any month in which you were eligible to participate in any subsidized health plan maintained by your employer or your spouse's employer. This rule is applied separately to plans that provide long-term care insurance and plans that do not provide long-term care insurance.

If you qualify to take the deduction, use the Self-Employed Health Insurance Deduction Worksheet in the Form 1040 instructions to figure the amount you can deduct. But if any of the following applies, do not use the worksheet.

You had more than one source of income subject to self-employment tax.

You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion.

You are using amounts paid for qualified long-term care insurance to figure the deduction.

If you cannot use the worksheet in the Form 1040 instructions, use the worksheet in Publication 535, Business Expenses, to figure your deduction.

http://www.irs.gov/publications/p502/ar02.html#d0e4314




I'll have to check with my accountant.


sitetest


54 posted on 01/20/2007 10:12:27 AM PST by sitetest (If Roe is not overturned, no unborn child will ever be protected in law.)
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To: sitetest

Actually the segment of the Federal government that I work for categorizes 2/3rds of its force as "intermittant", thus they get no benefits, vacation etc. Of the thousands of people in this group, a significant number actually are intermittent (they don't work full time, year round) but hundreds if not thousands more, do perform full time.

Many are covered by the VA or various other government plans, some others are on their spouse's insurance. Unfortunately none of those options work for me and as it is right now, there is no way I as a single unaffiliated individual, can afford to buy health insurance.

A health insurance tax break would really help a guy like me.


55 posted on 01/20/2007 10:20:59 AM PST by XRdsRev (The Democrat Party - Keeping Black folks on the "Plantation" since 1790)
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To: King Moonracer
"Kind of like how when people conserve electricity, the electric companies raise rates to maintain profits."

Electric companies are mostly monopolies, and thus they are not subject to our free market system. Entities that are not monopolies (health care) cannot raise prices because of competition in our system (they would lose market share to the other competitors).

Learn some basic economics and it will take you a long way to understanding all of this. Unfortunately, most people don't have a clue about how our free market system works or basic economics.
56 posted on 01/20/2007 10:23:22 AM PST by Hendrix
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To: XRdsRev

"A health insurance tax break would really help a guy like me."

It makes no sense that people who work for companies who provide heath insurance to their employees get tax free insurance, yet people who have to pay for it themselves have to pay for it with taxed dollars.

Our government has screwed this up with tax laws. If it were totally left to our free market system, we would not have a health care problem.


57 posted on 01/20/2007 10:27:32 AM PST by Hendrix
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To: All

Okay, look folks. Look at this thread. Everyone has had to go out and do major contortions to find their own solutions to their own individual problems -- and many replies say that only recently did they discover solutions.

The pre ex issue remains enormous. Oh, and the person to went from BCBS in one place to another . . . NO . . . that did not solve your problem. The new locale BCBS does have to take you, but they don't have to take you at the original price. They will jack your premium.

Pre ex in effect prevents you from relocating. Yes, a lot of this is state to state -- but look at this thread. Look at the contortions to find a solution -- and the solution you find will jack its prices double digit % per year.

Bush is stepping out and raising the issue. The GOP HAS TO HAVE A VOTE WINNING POSITION ON THIS BECAUSE IT WILL BE AN ENORMOUS 2008 ISSUE.

My suggestion is a federal mandate that all individual policies are, in total, a group. They get group rates and no pre ex exclusions. The insurance industry would be hit by this. The answer is a tax cut for that industry to compensate. This looks to me to be a solid tax-cutting conservative approach.


58 posted on 01/20/2007 10:47:40 AM PST by Owen
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To: Owen

Dear Owen,

"My suggestion is a federal mandate that all individual policies are, in total, a group. They get group rates and no pre ex exclusions."

The difficulty here is that many folks would sensibly refrain from buying health insurance until some major illness arose.

Without the ability to exclude pre-existing conditions, or to require continuous coverage in lieu of the exclusion, health insurance companies would receive individual policy premiums primarily from sick people, and not from well people.

Insurance doesn't work so well under those circumstances.

Your idea only works if there is an individual mandate requiring every adult to obtain health insurance. This hasn't usually gone over well with some segments of the Republican coalition.


sitetest


59 posted on 01/20/2007 10:54:33 AM PST by sitetest (If Roe is not overturned, no unborn child will ever be protected in law.)
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To: sitetest

>>
The difficulty here is that many folks would sensibly refrain from buying health insurance until some major illness arose.
>>

I think I disagree with this, and this is the focus of your objection. Group plans for employers cover everyone. Individual policies would be bought by those who choose to buy them. Yes, maybe this hurts the insurance industry, but that's what the industry targetted tax cut is for.

I am not invested in my own suggestion. My only focus here is to get the GOP recalibrated. Health Insurance used to be something that was not a conservative issue. It has to become a conservative issue NOW or we will lose 2008. I think it may be the #1 issue of 2008.


60 posted on 01/20/2007 11:01:29 AM PST by Owen
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To: Hendrix

Exactly where do free markets exist???? All markets are imperfect to one level or another, the more complex, the less free. I bet the insurance companies would love for everyone to buy their own insurance, then it would be their actuarials, government lobbyists, marketing shills, and MBA braintrust against each and every consumer. And if it were wide open, there'd be no explicit or implicit price collusion; none whatsoever...eyes rolling...


61 posted on 01/20/2007 11:08:37 AM PST by King Moonracer (Bad lighting and cheap fabric, thats how you sell clothing.)
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To: All

The markets are largely free as is. Competition does exist. The problem is the double digit % price increases, and of course that derives from defensive medicine because of malpractice lawsuits.

Those are not going to change. An incremental approach can work. Just attack the pre-ex issue by making all individuals part of a group, and group plans can't exclude pre-ex. Compensate the industry for their loss with a tax cut.

It's a very philosophically conservative tax cutting approach.


62 posted on 01/20/2007 11:12:40 AM PST by Owen
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To: PtrainerNYC
Just lower and simplify the friggin' tax code and get the government out of healthcare! How hard can this be???
63 posted on 01/20/2007 11:13:37 AM PST by Extremely Extreme Extremist (Forgot your tagline? Click here)
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To: CrawDaddyCA
Can someone explain the difference between Democrats and Republicans again? Lately, I'm having a hard time differentiating between the two.

You'll always find people here who defend the Republicans, no matter what foolish things they do.

64 posted on 01/20/2007 11:14:20 AM PST by highball ("I never should have switched from scotch to martinis." -- the last words of Humphrey Bogart)
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To: CrawDaddyCA

One has an R after the name, the other a D, that's about it, I believe both creatures are invertebrates.


65 posted on 01/20/2007 11:17:59 AM PST by WV Mountain Mama (2007 resolution: learn how to rail a berm.)
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To: nj26
I understand that you are possessive of your tax loophole. Most people are. That's why tax reform needs to be comprehensive.

Closing loopholes is not a tax increase if rates are reduced commensurately. Or if other taxes are cut so that it nets out.

That said, yes: I want to close your loophole. I would get pinched by it too. But it's good tax and health policy nothwithstanding.

66 posted on 01/20/2007 11:18:33 AM PST by sphinx
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To: Owen

Early retirees who take advantage of the HIPPA mandate which requires any company selling individual policies in a state to issue a policy notwithstanding pre-existing conditions, don't have the immediate threat to their life savings. Unfortunately, there's a specific time limit on the ability to do this, and many aren't aware of it. For those who are, and do, the issue's the cost of the individual policy rather than the availability.


67 posted on 01/20/2007 11:19:25 AM PST by ArmstedFragg
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To: oceanview
if I want to retire at 58, unless I can buy into my (former) employers plan - its hard to get gap insurance to bridge to medicare.

COBRA until your COBRA runs out, then HIPPA it. You'll pay about twice the normal cost of an individual policy, but you'll be covered.

68 posted on 01/20/2007 11:22:42 AM PST by ArmstedFragg
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To: Owen
Bush is stepping out and raising the issue. The GOP HAS TO HAVE A VOTE WINNING POSITION ON THIS BECAUSE IT WILL BE AN ENORMOUS 2008 ISSUE.

Yes, it will be a huge issue. The Democrats will say "We're going to give you free/government funded health care with no hassles. You just to the doctor when you want to. The system will take care of everything." This will appeal to a lot of people.

However, this will be rationed care with government gatekeepers hidden well out of site. The dems won't bother to point that out. Since a rationed federal system can coast for some years on the existing infrastructure, the real damage only becomes apparent downstream. That's the political difficulty we face.

69 posted on 01/20/2007 11:25:17 AM PST by sphinx
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To: Hendrix
discourage too much FREE insurance

Were you absent the day in Econ 101 when they taught there is no such thing as a FREE lunch?

70 posted on 01/20/2007 11:26:34 AM PST by WV Mountain Mama (2007 resolution: learn how to rail a berm.)
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To: Owen

Dear Owen,

"Group plans for employers cover everyone. Individual policies would be bought by those who choose to buy them."

This implies that you're looking for the group plans to subsidize the individual plans.

For a variety of reasons, this might be problematic. I'm not sure that it would fly in every state, that insurance commissioners would uniformly permit this. As well, insurance companies who did this would be at an extreme disadvantage in trying to be competitive in the group market, as their group plan rates would be driven higher compared to those who refused to subsidize individual plans through group plans.

But without the subsidization, individual plans would become death spirals. They would start out with sick folks and high premiums, and as folks were driven out of the plan due to cost, only the sickest would be left, thus driving up the premiums.

I agree, though, that the political party that at least appears to offer an acceptable plan will be a big winner.

I'm not sure, though, that many of the suggestions I see put forth really address the biggest underlying problems.


sitetest


71 posted on 01/20/2007 11:38:15 AM PST by sitetest (If Roe is not overturned, no unborn child will ever be protected in law.)
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To: PtrainerNYC

I can hear the Unions screaming now. When you are paying $750-1500 per month for HI, how can that not be income? Since they shot down his attorney bill, may as well attack the other side.

Pray for W and Our Troops


72 posted on 01/20/2007 11:42:56 AM PST by bray (Redeploy to Iran)
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To: PtrainerNYC
Basically if you dont have health insurance you get a tax break.

You people who post articles, then start off with your own falsely negative spin make me sick.

The first sentence from the article states:

President Bush will propose in his State of the Union address a tax break for people who buy their own health insurance...

That's excellent news considering how many people in this country buy their own health insurance. Like millions of others, I qualify for absolutely zero tax breaks. I do not own a home. I do not have dependent children. I do not own a business, but work as a "contract" employee in the IT department of a large corporation.

If this passes, finally there will be a tax break that helps me and people who are in a similar situation.

73 posted on 01/20/2007 11:44:59 AM PST by Wolfstar ("Common sense is not so common." Voltaire, 1764)
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To: sphinx

tax employer provided health benefits - and you will see employees start to reduce their level of coverage to reduce their tax burden on it. that's what will happen.

OK - you want to get the employer out of the loop and take it fully private. fine, propose medical 401Ks. I contribute (pre-tax) to the fund, my employer matches a portion of my contribution (tax deductible), and I buy my own private plan with it.

but the idea that some new round of taxes on people who already have health coverage, is going to solve the problems we have with the system, is crazy. it sounds like something the Dems would propose - we'll tax the system to reform it.


74 posted on 01/20/2007 12:47:40 PM PST by oceanview
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To: Mad_Tom_Rackham

we already have that - through deductibles and co-pays. I pay for the first $1200 of medical costs (including drugs), without getting a dime back.

your second point is right on - wage earners are already paying for medicaid to provide the underclass and illegals with health care, now we have to pay some new tax for our own coverage?


75 posted on 01/20/2007 12:49:50 PM PST by oceanview
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To: furquhart

fine, then propose medical 401Ks. that's the way to get to where you want to go.


76 posted on 01/20/2007 12:50:54 PM PST by oceanview
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To: what's up

and what will happen here is - the boomerang effect will give us univerasl medicare. put a new box on everyone's monthly wage statement that shows a new tax on their employer provided health care, and they will throw up their hands and embrace a full government solution.

the idea that we can tax our way to health care reform, is insane.


77 posted on 01/20/2007 12:54:51 PM PST by oceanview
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To: sphinx

correct - this is going to implode on us for 2008. Hillary will just offer universal medicare, and we'll be out there offering to tax employer provided health benefits.


78 posted on 01/20/2007 12:58:46 PM PST by oceanview
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To: PtrainerNYC
I'm paying about $240 every pay period (2 weeks) for my healthcare coverage. That money is taken from my gross earning and excluded from my federal taxable wages. It is an Aetna PPO at company group sponsored rates. It still comes with $1500 per person per year "deductible". If I understand this proposal from Bush, I'm going to be taxed on whatever value is placed on the company "contribution" to the group insurance coverage. I didn't use ANY of my medical coverage last year. That's been the case 5 out of the past 6 years.

I'm currently cruising through TurboTax after receiving the W2 for myself and my wife. My federal taxes are around $38,000 this year...and I'm not finished. My company went public and forced a dividend down the throat of every stockholder to buy down the stock price before splitting. That was equity I really didn't want drained. Now I have to wait for a 1099-DIV to continue doing my taxes.

79 posted on 01/20/2007 1:13:25 PM PST by Myrddin
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To: nj26

It is even worse. The illegals are getting free medical care and we, the American workers are getting the shaft. This is just the beginning of the socialist agenda.


80 posted on 01/20/2007 1:15:28 PM PST by DownInFlames
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To: Owen
A tax break for health insurance is a good idea. Why not let people deduct the cost of it off their tax return like they do their mortgage payments? People shouldn't be forced to choose between their health and eating dog food.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus

81 posted on 01/20/2007 1:20:41 PM PST by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives In My Heart Forever)
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To: Myrddin

and that's why, when people see that they are being taxed on their employer provided health benefit - their first reaction will be "I barely use this plan, so I'll drop it to save on taxes". this tax idea will result in less people having coverage. as a general rule, if you want LESS of something - tax it. tax employer provided health benefits, you'll get less of it. and those newly uninsured people, will be more willing to accept the idea of a national health care plan.


82 posted on 01/20/2007 1:21:40 PM PST by oceanview
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To: sitetest

I work for a sub-s company.


83 posted on 01/20/2007 1:29:53 PM PST by flynmudd (Proud Navy Mom to OSSA Blalock-DDG 61)
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To: PtrainerNYC

More Bush pandering to the left and it fits right in with his shamnesty plans.


84 posted on 01/20/2007 3:04:12 PM PST by VRWC For Truth (Defeat the traitor McCain for President. Job #1.)
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To: sitetest

"However, we just started a plan with an HSA component, and as the owner, I don't get the deduction for contributions to my own Health Savings Account (although, of course, my business gets a deduction for contributions to my workers' accounts)."

Here's some good news for a Saturday. I could double check when I'm back in the office but you get the deduction on your return. The company will pass it on to you as income and then you get the full deduction on your return. In the end it's semantics. Not many folks understand these things yet but I believe all you miss is the instant gratification.


85 posted on 01/20/2007 3:19:01 PM PST by Bogeygolfer
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To: flynmudd

Dear flynmudd,

"I work for a sub-s company."

That's nice.

I own one.


sitetest


86 posted on 01/20/2007 3:47:13 PM PST by sitetest (If Roe is not overturned, no unborn child will ever be protected in law.)
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To: Bogeygolfer

Dear Bogeygolfer,

"Here's some good news for a Saturday. I could double check when I'm back in the office but you get the deduction on your return."

Well, I'll have to check with my accountant, but my insurance agent, who also owns his own small insurance brokerage, assured me that I don't get and tax deductibility for the funding of my HSA.


sitetest


87 posted on 01/20/2007 3:49:42 PM PST by sitetest (If Roe is not overturned, no unborn child will ever be protected in law.)
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To: oceanview
I think you said it! We are not so stupid as to embrace another tax on ourselves. The Republicans are fools if they go for this.
88 posted on 01/20/2007 3:58:01 PM PST by pepperdog
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To: sphinx
"I would count all employer paid benefits as income. I would also count all government transfer payments as income. Broaden the base and reduce the rates."

Are you running for office? Because if you are I want to be sure I can vote against you. You are living in a dream world if you truly believe there would be any reduction in any rates anywhere. The insurance industry makes the IRS look as compassionate as the Salvation Army. What would really happen is insurance rates would remain the same or rise, and oh! looky, looky....it's a magical mystery tour that puts more money in the treasury.

The average working person is already burdened heavily with taxes at every level, I find it hard to believe you espouse even more taxes in the interest of "fairness". Why don't you just pay everyone the very same salary, take the very same amount out for taxes, etc. Now wouldn't that be perfectly fair?
89 posted on 01/20/2007 4:09:52 PM PST by pepperdog
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To: bray

you'll see - government employees, teachers, etc - who receive health benefits as part of their compensation, will be exempt from this somehow. either they will fall below the exemption limit (7500 single, 15000 family), or will just be excluded.


90 posted on 01/20/2007 4:18:11 PM PST by oceanview
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To: pepperdog

is my parking spot at work considered an "employer provided benefit". should it be added to my wages for tax purposes? how about the free coffee they make available to me?


91 posted on 01/20/2007 4:19:47 PM PST by oceanview
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To: Wolfstar

Good eye, Wolfstar. I see the poster has been banned.


92 posted on 01/20/2007 4:48:05 PM PST by onyx (DONATE NOW! -- It takes DONATIONS to keep FR running!!)
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To: oceanview

Yep, I'm sorry but you'll have to pay. We must be fair and get you on the same level as everyone else. It's the Communist way.


93 posted on 01/20/2007 4:50:27 PM PST by pepperdog
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To: sitetest

Read your 2006 Fringe Benefits section on taxable benefits.


94 posted on 01/20/2007 5:02:54 PM PST by flynmudd (Proud Navy Mom to OSSA Blalock-DDG 61)
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To: pepperdog
Of course rates can be reduced. The top rate was 28% when Reagan was done. Then we started backsliding.

The 28% rate was achieved by broadening the base. Even then, the reformers didn't tackle the big tax expenditures, which we should. Income is income. Treat it all the same.

95 posted on 01/20/2007 5:58:15 PM PST by sphinx
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To: sphinx

and the biggest area - taxes on unearned income - is obscene. people like Theresa Heinz Kerry and the Walmart heirs, making interest income off huge trust funds, paying no payroll taxes, and a low income tax rate.


96 posted on 01/20/2007 6:05:53 PM PST by oceanview
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To: pepperdog

"The average working person is already burdened heavily with taxes at every level, I find it hard to believe you espouse even more taxes in the interest of "fairness". Why don't you just pay everyone the very same salary, take the very same amount out for taxes, etc. Now wouldn't that be perfectly fair?"

Bush appears to be trying to revive Stalinism.


97 posted on 01/21/2007 12:25:02 AM PST by nj26 (Border Security=Homeland Security... Put Our Military on the Border! (Proud2BNRA))
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To: sitetest
May a self-employed person contribute to an HSA on a pre-tax basis?
No. Self-employed persons may not contribute to an HSA on a pre-tax basis and may not take the amount of their HSA contribution as a deduction for SECA purposes. However, they may contribute to an HSA with after-tax dollars and take the above-the-line deduction.

The above is from frequently asked questions at a tax website. It conforms to what I know. My guess is that the confusion stems from the pre tax vs post tax (on your return) which is confusing a number of industry professionals. The post tax is actually easier you just don't get the payroll tax deductions. The other confusion could be about the underlying premiums but my guess is that part is pretty basic. Ask your accountant but to my knowledge everybody gets the hsa deduction.
98 posted on 01/21/2007 10:19:06 AM PST by Bogeygolfer
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To: PtrainerNYC

It's a good idea. Bush is trying to remove the unfairness of NOT taxing employer-paid health premiums. (Would it be fair to NOT tax employer-paid mortgage payments, or car payments?)
Bush wants to move away from the current unfairness. He will be xxxx upon, criticized and slammed for it.
I would go all the way. Tax employer-paid health premiums.
OR
leave their taxable status alone, but provide a 100% deduction from gross income for health premiums paid by the self-employed and those whose employer doesn't pay for health premiums.
No other way is fair.


99 posted on 01/21/2007 10:32:10 AM PST by Leftism is Mentally Deranged (left is daft)
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To: sphinx

Personally, I think that Joe is a bit more astute than Sam....A benefit is just that a benefit. In a free system we make the cognitive decision to work at the corner grocer or for a company that offers non taxable benefits. Unfortunately, Our two party system has evolved into a choice between which type of socialism do you prefer. One party represents those that are waiting for the next political handout and the other is determined to undermine our middle class in the spirit of globalization. I think this is a huge issue that the Freepers need to take notice of.


100 posted on 01/22/2007 6:26:39 PM PST by mpstan
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