Calculating what McCain's health plan would do

Calculating McCain's tax on health benefits

John McCain's goal of shifting Americans away from employer-provided insurance could most affect people who already have decent coverage. McCain would tax workers on the value of benefits they get from their employer. To offset higher taxes, he would offer tax credits, which workers could use to buy coverage.

Barack Obama's plan is more difficult to analyze because he has not provided detailed figures on proposed subsidies or potential penalties.

Here's how McCain's plan would affect a couple with two children, earning the median household income for King County and with an average employer plan worth $12,000 a year, of which the employer pays 75 percent.

Adjusted gross income: $80,000

Standard deduction for married, filing jointly,

plus exemptions for four people: $24,900

Taxable income: $55,100

Federal income tax (15 percent bracket): $7,462

Employee's portion of premiums: $3,000

Income tax plus premiums cost: $10,462

If you stay on employer's plan and take McCain's tax credit:

Adjusted gross income: $80,000

Employer's portion of premiums: $9,000

Standard deduction, exemptions: $24,900

Taxable income: $64,100

Federal income tax (15 percent bracket): $8,812

Employee's portion of premiums: $3,000

Refundable tax credit for family: $5,000

Income tax minus tax credit exceeding premium costs: $6,812

If employer stops coverage and you use the tax credit to buy a comparable plan on your own:

Adjusted gross income: $80,000

Standard deduction, exemptions: $24,900

Taxable income: $55,100

Federal income tax (15 percent bracket): $7,462

Full premiums for a plan comparable to employer coverage: $12,000

Refundable tax credit: $5,000

Income tax plus premiums cost: $14,462

Note: McCain's plan would continue to exempt health benefits from Social Security and Medicare taxes.

Source: Valerie Moseley, certified public accountant with Joseph & Associates in Seattle