In an effort to explain by example, or at least by handpicked scenario, the Treasury Department has released more details outlining the possible application of President Bush’s plan for a standard health insurance deduction.

The president’s plan, which he announced during his State of the Union address last week, would be part of a major change to the tax code -- treating employer-provided health insurance as taxable income (instead of exempting it from income and payroll taxes) and creating a new tax benefit for those buying insurance on their own rather than through an employer.

The handful of Treasury examples involve:

  • An uninsured family of four with $60,000 compensation;
  • A family of four insured through work with $60,000 compensation; with the employer paying $10,000 and an employee paying $4,000 for health insurance;
  • An uninsured single mother with two children with $20,000 compensation;
  • A family of four insured through work with $100,000 compensation; with the employer paying $10,000 and an employee paying $4,000 for health insurance; and,
  • A family of four insured through work with $100,000 compensation; with the employer paying $15,000 and an employee paying $5,000 for health insurance.

The standard deduction the president has proposed for health insurance would be $15,000 for families and $7,500 for individuals.The Treasury’s scenarios are available at www.treas.gov/press/releases/reports/examples01.28.06.pdf.

A number of think tanks have also tackled the proposal, including the Tax Foundation, which has published its own batch of scenarios at www.taxfoundation.org/files/ff75.pdf.

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