Submitted by Richard MacKirdy, Feb 1, 2007 16:48

Would someone please help me understand this talk about standard deduction?

I'm from the left coast where a bunch of engineers have gotten together to make the economy of California work in Silicon Valley – in spite of our boys and girls downtown at the state capital trying to spend us into oblivion.

We have the administration suggesting the elimination of the employer tax deduction for health insurance in favor of a standard deduction of $15,000 of there is more than one person in the family and $7,500 if I am filing as an individual – right?

Then your article goes on to suggest that this standard deduction would in "many cases" cover the entire cost of the coverage. I'm sorry, I guess I must have been born in Missouri – the show me state.

So let's take a look at a couple of numbers. Not having access to the medical insurance costs in New York, I will use approximate medical insurance costs figures from California.

Two situations: (A) Traditional family with employee, spouse, and 1.2 children; (B) Single parent with 1.2 children.

Using the 15% "Federal tax bracket" and a $40 Copay PPO plan:

Family (A) would be under water (pay additional costs for coverage over the magnificent standard deduction) by the following amounts:

age 25, -$4,230;

age 35, -$5,190

age 45, -$6,150

[My calculation for an age 35 employee: After tax benefit of standard deduction ($15,000 x 15% = $2,250) less the cost of coverage ($620 per month x 12 = $7,440) =

-$5,190 ]

Using the 15% "Federal tax bracket" and a $2400 Copay PPO HSA Compatible plan:

Family (A) would be under water (pay additional costs for coverage over the magnificent standard deduction) by the following amounts:

age 25, -$1,350;

age 35, -$2,250

age 45, -$3,750

[My calculation for an age 35 employee: After tax benefit of standard deduction ($15,000 x 15% = $2,250) less the cost of coverage ($400 per month x 12 = $4,800) =

-$2,250 ]

Well you get the idea. There is a BIG question, where are the "many cases" that would be covered by the a standard deduction.

Oh, by the way, I don't know how it is in New York but the last time I checked the California law (as in the other day), the increased taxable income caused by the elimination of the employer deduction would be fully taxable income by the state, over 7%. Further, the State of California does not recognize HSA contributions because the "boys and girls down town" want to discourage HSAs in favor of an "efficiently run" government program -- socialized medicine approach.

Sounds like this is just a complicated income tax increase looking for uneducated minds.

Note: Comments are screened, and in some cases edited, before posting. We reserve the right to reject anything we find objectionable.