Proposal offers tax deductions for health insurance coverage

Between 46 million and 48 million people in the U.S. are uninsured.
WASHINGTON (AP) -- President Bush will propose a tax deduction of 7,500 for individuals and 15,000 for families regardless of whether they buy their own health insurance or receive medical coverage at work.
The proposal, to be announced Tuesday in his State of the Union address, is aimed at giving the uninsured an incentive to purchase a medical plan. It also is designed to encourage those with generous plans to either embrace cheaper insurance or pay taxes on the part that exceeds the deduction, a Bush administration official familiar with the proposals said Saturday.
If passed by Congress, the proposal would be the first time that workers could get a tax break if they bought their own insurance. But it also would be the first time that some employer-provided health care benefits could be taxed. Health care benefits provided by companies are currently exempt from income and payroll taxes.
Redistributing money
In his nationally televised speech, Bush also will announce steps to take some federal money now going to hospitals and other facilities and give it to states for programs to reduce the number of uninsured people.
The cost of health care is growing more than two times faster than wages, making it harder for families to buy insurance and for employers to sponsor a health benefit for workers, Bush said Saturday in his weekly radio address.
"Our challenge is clear: We must address these rising costs, so that more Americans can afford basic health insurance," Bush said. "And we need to do it without creating a new federal entitlement program or raising taxes."
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