One of the most popular items in the tax code is the child tax credit. It’s popular because it recognizes a need that has social importance (raising children) and it addresses the need in a way that is non-intrusive.
All you have to do to get a $1,000 reduction in your income taxes is have a child. The federal government doesn’t tell you what to do with your child or how to spend the money. Wisely, the tax writing committees of the Congress have decided that you know more about how to parent your child than they do.
Why can’t we have something that simple and helpful for health care? We could. If we took all existing health insurance subsidies (including subsidies for employer coverage) and replaced them with a universal tax credit, I believe the amount would be close to $2,500 per adult and $8,000 for a family of four. Since this is roughly what it costs to enroll people in Medicaid, those amounts would buy Medicaid-like insurance. But if people wanted more or better lnsurance (including Health Savings Account plans) they could add their own money or an employer’s money – so long as they used after-tax funds.
The tax credit could copy three features of Obamacare subsidies and still be simple and easy to administer. The credit would be refundable (available to people who don’t owe any taxes), advanceable (so you don’t have to wait until next April 15th to get the money) and transferable (so that signing up for health insurance could be handled by an insurance company or H & R Block).
Here is what we are doing instead: