The Bush health plan: What tax break?

WASHINGTON -- Everything is negotiable in D.C., but nothing more so than the definition of a simple word.

On Tuesday, President Bush gave his State of the Union address, and announced that he was cutting Americans a break on health-insurance costs -- by calling a "tax" a "deduction." Here's what he said: "I propose a standard tax deduction for health insurance, that will be like the standard tax deduction for dependents."

This sounds fine until you remember that in order to get a deduction on something, you have to first pay taxes on it. Right now, you don't pay taxes on your employer-sponsored health benefits.

More than half of all Americans get their health insurance through an employer.

Seattle's longtime Democratic congressman, Jim McDermott, snorted at the idea. "It's a tax. Let's see what happens if he calls it by its name," he added.

McDermott contends that the administration's plan is a not-so-subtle way to let employers stop offering worker health insurance, which Republicans and some corporations have wanted for years.

He wondered why the president did not propose incentives to health-insurance companies to create ways to allow more individuals, whose insurance costs are high, to buy into larger, cheaper plans.

McDermott hopes to push a national health-care plan on the Ways and Means Committee, now that he's in the majority.

Families USA, a Democratic-leaning advocacy group, also criticized Bush's wording. "This so-called deduction is a new tax," said Executive Director Ron Pollock.

Bush's plan is a deduction for those who don't have an employer-sponsored plan and can afford to buy insurance on their own.

Some columnists endorsed the idea because they think too many Americans want "luxury" medical benefits, luxury being another word that begs for definition.

They jumped on the administration's assurance that a new tax on health benefits would only kick in if your family plan costs more than $15,000 per year.

An accountant in D.C., age 59, told me that won't be hard. His two-person corporation, in which his wife works, pays $27,000 a year for his family plan. He would have to pay taxes on $12,000, he said.

Starbucks Chairman Howard Schultz thinks more corporations should offer health benefits, as his company does, even though they cost him more than wholesale coffee beans. He's traveled to D.C. to promote that idea.

Schultz probably knows the difference between a tax and a deduction.

But in D.C., where semantics is a full-contact sport, one word is like another if your media machine is big enough to back it up.

Letter from Washington is an examination of the culture of politics and power in the nation's capital. Alicia Mundy can be reached at 202-622-7457 or at amundy@seattletimes.com.