Individual Tax Cuts

Senator Obama: "What I've called for is a tax cut for 95 percent of working families, 95 percent."

Score: 3 (Nose is growing)

Details: Senator Obama has proposed a tax cut of $500 for workers and $1,000 for working couples. Notice that this tax cut is for "workers" and "working couples," not 95% of the population. Senator Obama gets a score of 3 for two reasons. First, according to factcheck.org, Senator Obama's tax plan would benefit only 81% of workers and working households, not 95%. Second, he neglected to point out that the plan generates less than $42 per month for workers and $84 per month for working couples. As regular readers know, I believe every dollar counts. That said, it's a bit difficult to get excited over $42 to $84 per month. In fact, I suspect Senator Obama would have looked foolish had he said, "Washington has neglected the middle class over the last eight years. I'll change all that by giving workers $42 a month." Tax cuts for "95% of working families" sounds a lot better, but it does not tell the whole story.

Senator Obama has proposed other tax cuts, including a mortgage credit for those that do not itemize their deductions and a college credit, both of which would lower taxes for some, but not 95% of workers.

Source:

• Tax Policy Center's 2008 Presidential Candidates' Tax Proposals
• Barack Obama's Comprehensive Tax Plan (pdf file)
• FactChecking Debate No. 1

Senator McCain: "So the point is, I want people to have tax cuts. I want every family to have a $5,000 refundable tax credit so they can go out and purchase their own health care. I want to double the dividend from $3,500 to $7,000 for every dependent child in America.

Score: 2 (yes, but. . .)

Details: Senator McCain does propose a $5,000 refundable tax credit, and he does propose to increase the dependent child exemption from $3,500 to $7,000. But he leaves out a few details. First, Senator McCain proposes to tax individuals for the value of health care benefits paid by their employers (Senator Obama incorrectly stated that Senator McCain proposed taxing the employer), so the value of the $5,000 credit would be reduced, if not eliminated for some. Also, the doubling of the dependent exmeption is misleading because, under current law, it is estimated that the exemption would reach $4,200 by the time Senator McCain's $7,000 exemption took effect for most taxpayers. A small point, perhaps, but we do watch every dime here at the Dough Roller.

Source:

• FactChecking Debate No. 1
• An Updated Analysis of the 2008 Presidential Candidates' Tax Plans: Executive Summary - Revised September 15, 2008

Senator Obama: "And if you make less than $250,000, less than a quarter-million dollars a year, then you will not see one dime's worth of tax increase."

Score: 3 (Nose is growing)

Details: Senator Obama has proposed increasing the capital gains tax rate (which is currently 15%) for families making more than $250,000 and individuals making more than $200,000. While at times he has stated his intention to raise the tax to as high as 28%, he currently plans to raise it to 20%. In past speaches and printed materials, he has stated that no families making less than $250,000 will pay a dime more in taxes. During the debate, he failed to make this distinction.

He also plans to increase social security tax by 2 to 4% on individuals making $200,000 or more.

Source:

• The Tax Facts: The Truth About the Obama Plan (pdf file)
• Tax Policy Center's 2008 Presidential Candidates' Tax Proposals

Senator Obama: "And in [McCain's] tax plan, you would have CEOs of Fortune 500 companies getting an average of $700,000 in reduced taxes, while leaving 100 million Americans out."

Score: 2 (yes, but. . .)

Details: The current tax rates as enacted in 2001 and 2003 are set to expire in 2010. These tax cuts benefit virtually all workers. Senator McCain proposes to make the current marginal rates permanent. When Senator Obama refers to "reduced taxes," he is comparing taxes under McCain's plan with pre-Bush tax rates. Senator McCain is not proposing to lower income tax rates as they exist today.

In addition, Senator McCain has made several tax proposals that would benefit the middle class, calling into question Senator Obama's claim that McCain is "leaving 100 million Americans out." For example, here is how the Tax Policy Center describes Senator McCain's increase in the dependent exemption:

Dependent exemption increase. Taxpayers may claim exemptions for themselves, their spouses (on joint returns), and each dependent (usually children, but also certain other relatives and household members supported by the taxpayer). The exemption is $3,500 in 2008 and is indexed for inflation going forward. Senator McCain has proposed increasing the dependent exemption— but not the personal exemption for taxpayers themselves—by $500 each year beginning in 2010 until it reaches $7,000 in 2016, after which it would again be indexed for inflation.7 Although billed as a doubling of the exemption, the $7,000 exemption would be only two-thirds higher than the level we project under current law in 2016 ($4,200).

Married couples filing a joint return reporting adjusted gross income of $50,000 or less would be eligible for the $7,000 exemption immediately (in 2009). The higher exemption is not indexed for inflation until 2017 and would phase down at a rate of $100 for each $1,000 (or fraction thereof) in excess of 50,000, but not below the level set for all taxpayers. Thus, even for lower- income married filers, the doubled exemption only applies (approximately) in the first year.

Source:

• An Updated Analysis of the 2008 Presidential Candidates' Tax Plans: Revised August 15, 2008
• Taxes: Simple, Fair, Pro-Growth and Competitive

Senator McCain: "And so, again, look at the record, particularly the energy bill. But, again, Senator Obama has shifted on a number of occasions. He has voted in the United States Senate to increase taxes on people who make as low as $42,000 a year."

Senator Obama: "That's not true, John. That's not true."

Score: McCain--1 (rock solid); Obama-3 (nose is growing)

Details: According to factcheck.org, "Yes, as we’ve said before, Obama did in fact vote for a budget resolution that called for higher federal income tax rates on a single, non-homeowner who earned as little as $42,000 per year. A couple filing jointly, however, would have had to earn at least $83,000 per year to be affected. A family of four with income up to $90,000 would not have been affected." Senator Obama's current tax proposal would not include such an increase, but he did vote in favor of increasing taxes on individuals making as little as $42,000.

Source:

• FactChecking Debate No. 1

Corporate Tax Rates

Senator Obama: "Look, it's just not true. And if we want to talk about oil company profits, under your tax plan, John -- this is undeniable -- oil companies would get an additional $4 billion in tax breaks."

Score: 2 (yes, but. . .)

Details: Senator McCain has proposed a gradual decrease of the current 35% corporate tax rate. Under his plan, after 2014 the corporate tax rate will reach 25%. While it is true that this reduced tax rate will benefit big oil, it is just as true that it will benefit manufacturers of baby food, safety equipment, life-saving drugs, and alternative energy sources. To single out big oil as a benefactor of McCain's tax proposal is misleading, at best.

Source:

• An Updated Analysis of the 2008 Presidential Candidates' Tax Plans: Revised August 15, 2008

Senator Obama:"Senator McCain is proposing -- and this is a fundamental difference between us -- $300 billion in tax cuts to some of the wealthiest corporations and individuals in the country, $300 billion."

Score: 2 (yes, but. . .)

Details: Senator McCain has proposed cutting the corporate tax rate from 35% to 25%. The tax cut would be phased in, with the 25% rate taking effect in 2015. According to the Tax Policy Center, the reduction would reduce tax revenues by $231 billion over four years (2009-2013). We'll give Senator Obama the benefit of the doubt on the numbers. After all, given the financial crisis we are facing, what's $69 billion? But the tax cut is not for the "wealthiest corporations"; it's for all corporations, wealthy or not.

Source:

• An Updated Analysis of the 2008 Presidential Candidates' Tax Plans: Updated September 12, 2008. Note, this is an excellent and extremely detailed analysis of both McCain's and Obama's tax plans.

Senator McCain: "Right now, the United States of American business pays the second-highest business taxes in the world, 35 percent. Ireland pays 11 percent."

Senator Obama: "Now, John mentioned the fact that business taxes on paper are high in this country, and he's absolutely right. Here's the problem: There are so many loopholes that have been written into the tax code, oftentimes with support of Senator McCain, that we actually see our businesses pay effectively one of the lowest tax rates in the world."

Score: McCain-3 (nose is growing); Obama-2 (yes, but. . .)

Details: Senator McCain is correct that at 35%, our corporate tax rate is one of the highest in the world. But corporations, like individuals, benefit from a number of deductions and exemptions, reducing their taxes to one of the lowest in the world. Senator McCain gets a 3 for suggesting that U.S. corporations pay one of the highest tax rates in the world and for using Ireland as a comparison (why Ireland?). Senator Obama gets a 2 because the "loopholes" he talks about are called deductions, exemptions, credits, and the like, and aren't as pernicious as Senator Obama suggests. Besides, if he plans to eliminate them, than Senator McCain's claim that U.S. corporations pay one of the highest tax rates in the world would be true.

Source:

• An Updated Analysis of the 2008 Presidential Candidates' Tax Plans: Updated September 12, 2008

Senator Obama's Spending Proposals

Senator McCain: "Now, Senator Obama didn't mention that, along with his tax cuts, he is also proposing some $800 billion in new spending on new programs."

Senator Obama: "I -- I don't know where John is getting his figures. Let's just be clear."

Score: McCain--2 (yes, but. . .); Obama--3 (nose is growing)

Details: According to an AARP article, Senator Obama estimates the cost of his spending plan at $130 billion, or $520 billion during a first term in the White House. According to the Taxpayers Union, the cost of Senator Obama's spending plans would be just under $300 billion a year, or $1.2 trillion during his first term. According to a U.S. News & World Report, Senator Obama's campaign acknowledged that his spending plans would cost a quarter of a trillion per year, or over $1 trillion during his first term.

I gave Senator McCain a 2 not because the $800 billion number is wrong, but because it is unclear where it comes from. Senator Obama gets a 3 because he should know full well that the $800 billion number is in the right ballpark, give or take a few hundred billion. In the final analysis, I'd like to hear Senator Obama describe what his proposals will cost.

Source:

• Adding up the cost of Obama's agenda
• Democratic Presidential Candidate Spending Analysis – Barack Obama
• Obama's Trillion-Dollar Spending Plan - Capital Commerce (usnews.com)

Earmarks

Senator McCain: "Earmarks account for $18 billion in last year's budget."

"Senator Obama suspended those requests for pork-barrel projects after he was running for president of the United States. He didn't happen to see that light during the first three years as a member of the United States Senate, $932 million in requests."

"But the point is that – you see, I hear this all the time. "It's only $18 billion." Do you know that it's tripled in the last five years?"

Senator Obama: "Well, Senator McCain is absolutely right that the earmarks process has been abused, which is why I suspended any requests for my home state, whether it was for senior centers or what have you, until we cleaned it up."

Score: McCain and Obama-2 (yes, but. . .)

Details: Earmarks have been a source of attack for Senator McCain for years. To the contrary, Senator Obama has obtained nearly $1 trillion in earmarks for his constituents, including $1 million for the hospital where his wife works. Senator McCain blew it, however, when he said earmarks had tripled in the last year; they have actually gone down by 24%. Finally, Senantor Obama has suspended his requests for earmarks, but Senantor McCain is probably right that it was a purely political move.

Source:

• FactChecking Debate No. 1

The feds levy a tax on gas equal to $0.184 per gallon (tax on diesel is $.0244). Each of the candidates has a different view on whether the government should suspend the gas tax during the summer months when families criss-cross our fine country in search of the largest ball of twine (at least that's what we did when I was a kid). Let's check out each of their views, and then you can cast your vote to choose which proposal you think is best.

Senator Clinton, McCain and Obama's Gas Tax Proposals

In short, here are each of their proposals on the gas tax holiday:

Senator Clinton: She proposes suspending the federal gas tax from Memorial Day to Labor Day and imposing a 'windfall' tax on big oil companies to pay for it.

Senator McCain: He proposes the same suspension of the federal gas tax, but he wouldn't tax the oil industry to pay for it.

Senator Obama: He believes we shouldn't suspend the federal gas tax because we need the revenue to fund construction projects for roads, bridges and other infrastructure.

Now what's become more interesting than the proposals is the candidates' remarks about their opponent's proposals. Senator Clinton, for example, said that Senator Obama is out of touch with the economic realities faced by ordinary citizens:

[The federal gas tax holiday] might not mean much to my opponent, but I think it means a lot to people who are struggling here, people who commute a long way to work, farmers and truckers.

Senator Obama shot back saying,

We're arguing over a gimmick that would save you half a tank of gas over the course of the entire summer so that everyone in Washington can pat themselves on the back and say they did something.

A McCain spokesman said that Senator Obama "does not understand the effect of gas prices on the economy. Senator Obama voted for a gas tax reduction before he opposed it." This last point is a reference to the fact that as a state representative, Senator Obama voted at least three times in favor of temporarily lifting the state's 5 percent sales tax on gasoline.

But the best one-liner goes to Senator Obama, who said "let me tell you, this isn't an idea designed to get you through the summer, it's designed to get them through an election."

The Federal Gas Tax Holiday--Yes or No?

In my opinion, Senator Obama is the winner on this issue. First, what do you think big oil will do if the federal government imposes an 18.4 cent 'windfall' gas tax on the industry as Senator Clinton has proposed? Hmm, maybe raise the price of gas by, oh I don't know, maybe 18.4 cents per gallon. Second, gas prices do hurt. But isn't the answer to drive less, buy more efficient cars, live closer to work, telecommute, and so on? It seems the government is willing to do just about anything to keep us consuming at a breakneck pace (See Tax Rebate Checks). And while smarter money management recognizes the value even in 18.4 cents per gallon, is it really going to make that much difference to our budgets? Is it worth sacrificing the funds we need to repair and improve our country's crumbling infrastructure?

On this issue, I side with Senator Obama. The federal gas tax holiday is political pandering at its worst. We need solutions to the country's long-term problems, not temporary feel-good measures. But what say you?

Overview of Presidential Candidates' Tax Policies

The tax policies of Senators Obama, Clinton and McCain fall along party lines. Both Senators Obama and Clinton would raise taxes substantially on those making more than about $100,000 per year, and particularly on those making more than about $250,000. At the same time, Senators Obama and Clinton have proposed various tax cuts for those making a middle or lower class wage.

In contrast, Senator McCain's tax policy would not raise taxes. He has proposed various tax cuts, some of which would benefit those making less than $100,000 per year, and some benefiting those making more. In addition, Senator McCain would make it harder for Congress to raise taxes by requiring a 3/5 vote to do so.

As you evaluate the candidates' tax policies described in more detail below, you may wish to consider the following:

• As of April 24, 2008, the U.S. national debt stood at $9,333,202,141,247.10 (Source: Treasury Direct).
• The top 20% of wage earnings currently earn 61% of the income and pay 73% of the income tax. The next 20% of wage earners pay 17% of the income tax.

Click on image to see supporting data
• By 2080, the cost of Social Security, Medicare and Medicaid will equal nearly 22% of gross domestic product (it's currently about 8%).
• Under current projections, Medicare spending will exceed revenues from its dedicated tax by 2010, and its trust fund will be exhausted by 2018.
• Social Security will reach the same landmarks in 2017 and 2040, respectively.

It's an understatement to say that the next President of the United States and the Congress will have some very difficult decisions to make. One of those decisions will be whether to continue with President Bush's tax cuts, or to repeal them in whole or in part. For this reason, we'll briefly look at President Bush's tax cuts, and then turn to the candidates' proposals.

President Bush's Tax Cuts

Here are several key facts about President Bush's tax policy and cuts since 2001:

• Congress has cut taxes every year since 2001. The most significant tax cuts came from the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003.
• Tax cuts since 2001 have reduced most individual tax rates including those on capital gains and dividends, expanded the child tax credit, phased out the limitations on itemized deductions and personal exemptions for high-income taxpayers, and phased out the estate tax. Virtually all of the cuts end by 2011.
• The tax cuts will reduce government revenue by approximately $2 trillion over the 2001–2010 period.
• President Bush's tax cuts, on a percentage basis, benefited high-income earners the most, as indicated in the following table:

Source: Tax Policy Center

This last point has been the source of much of the debate surrounding President Bush's tax cuts. Some view this as evidence that President Bush's tax cuts favors the wealthy at the expense of the working class. Others note that the wealthy pay the vast majority of income taxes, and an across the board tax cut that benefits everybody in proportion to the amount of taxes they pay is fair and equitable.

2008 Presidential Candidates' Tax Proposals

President Bush's Tax Cuts

Senator Obama

He would repeal President Bush's tax cuts for the top two income tax brackets. This proposal would change the top two brackets of 33% and 35% to 36% and 39.6%. Based on the 2007 tax brackets, these changes would increase taxes for single filers making more than $160,000 and joint filers making more than $195,000.

Senator Obama also would increase taxes on dividends and capital gains. In speeches, Senator Obama has expressed his concern that the government taxes income from work more than it does income from investments. He would change this by returning to the Clinton-era tax rates for dividends and capital gains.

Finally, Senator Obama would freeze estate tax at 2009 levels and extend the cut after 2011.

Senator Clinton

She would also repeal President Bush's tax cuts for the top two income tax brackets. Senator Clinton also would repeal the PEP and Pease phaseouts for households making more than $250,000. The PEP ("personal exemption phase-out") provision prevents high-income earners from claiming a personal exemption ($3,200 in 2005) for each member of their household, and the Pease (named after former Rep. Don Pease (D-OH)) provision limits the value of itemized deductions for taxpayers with high incomes. Senator Clinton also would freeze estate tax at 2009 levels and extend the cut after 2011.

Senator McCain

He would make permanent the Bush tax cuts on both income and investments.

New Tax Cuts

Each candidate has proposed various new tax cuts. Senators Obama and Clinton's tax cuts focus on the middle and lower class wage earners. Senator Mccain's tax cuts focus on all levels of income earners.

Senator Obama

1. Making Work Pay tax credit: A refundable tax credit of up to $500 per person, or $1,000 per family. Senator Obama estimates that this will benefit 150 million workers and that for 10 million Americans, it will completely eliminate income taxes. Senator Obama has not indicated what income limits will qualify an individual or family for the "Making Work Pay" tax credit, but it's clearly intended for the middle and lower class wage earners.
2. Expand the Child and Dependent Care Tax Credit: This credit currently covers up to 35 percent of the first $3,000 of child care expenses a family incurs for one child and the first $6,000 for a family with two or more children. Senator Obama proposes to make the tax credit refundable and allow low-income families to receive up to a 50 percent credit for their child care expenses.
3. Eliminate Income Taxes for Seniors Making Less Than $50,000: Senator Obama proposes to eliminate all income taxation of seniors making less than $50,000 per year.
4. Expand the Earned Income Tax Credit: Senator Obama would increase the number of working parents eligible for EITC benefits, increase the benefit available to parents who support their children through child support payments, and reduce the EITC marriage penalty. Full-time workers making minimum wage would get an EITC benefit up to $555, and those supporting children would get a benefit of $1,110.
5. Universal Mortgage Credit: This 10 percent credit will provide the average recipient with approximately $500 per year in tax savings, according to Senator Obama. It will a refundable credit for those who do not itemize their deductions.
6. American Opportunity Tax Credit: This universal and refundable credit will pay for the first $4,000 of college tuition for most Americans. It is unclear exactly who would be eligible for this tax credit.
7. Expand the existing Savers Credit: Senator Obama proposes to match 50 percent of the first $1,000 of savings for families that earn under $75,000 and to make the tax credit refundable. The savings match will be automatically deposited into designated personal accounts by using the account information listed on IRS tax filings.

Senator Clinton:

1. Health Care Tax Credit: As part of Senator Clinton's health care proposal, she wold create an income-related refundable tax credit for health insurance, new health care tax credit for small businesses to insure employees, and new tax credit for qualifying private and public retiree plans under health plan
2. American Retirement Accounts Plan: Under the plan, individuals could contribute up to $5,000 per year on a tax deferred basis, and the first $1000 contributed into the accounts would be matched by the government on a 50%or 100% basis, depending on eligibility.
3. College tax credit: Senator Clinton would implement a $3,500 partially refundable college tax credit.
4. Reform AMT: Senator Clinton has said she would reform AMT "to ensure people don’t face stealth tax increases."

Senator McCain:

1. Repeal AMT: Senator McCain would permanently repeal the Alternative Minimum Tax.
2. Raise personal exemption: He proposes to raise the personal exemption for each dependent from $3,500 to $7,000.
3. Reduce corporate tax rate: Senator McCain would reduce the federal corporate tax rate from 35% to 25%.
4. Ban Internet Taxes: Senator McCain would seek a permanent ban on taxes on the Internet.
5. Ban New Cell Phone Taxes: He also would seek to prohibit new cellular telephone taxes.

New Tax Increases

Apart from Senator Clinton and Obama's proposal to repeal President Bush's tax cuts, the most significant tax increase proposal comes from Senator Obama. Specifically, he proposes to raise the social security payroll tax. Currently, the Social Security payroll tax applies to the first $102,000 a worker makes. Senator Obama would raise this limit, although he has not indicated by how much.

Additional Reading

Here are some additional sources if you'd like to explore further the presidential candidates' tax policies:

• Tax Foundation's comparison chart of the candidate's tax proposals.
• Tax Policy Center's comparison chart of the candidate's tax proposals.
• CNN Money's analysis of the candidates' tax proposals.

If elected, he promises to simplify tax filings for middle class Americans so that millions can prepare their returns in less than 5 minutes. According to Senator Obama's website, experts estimate that his proposal will save Americans up to 200 million total hours of work and aggravation and up to $2 billion in tax preparer fees. Senator Obama has not identified who these experts are or the basis for their opinions, at least not that I can find.

And this leads us to the first ever poll on The Dough Roller. So what do you think. . .

Key Provisions of Clinton's American Health Choices Plan

You can download a pdf version of the plan by clicking on the image to the right or by clicking here. The plan has 5 key provisons:

• Universal Coverage: The plan covers everybody. There are about 47 million Americans without health insurance, and Hillary Clinton's proposal would provide coverage for all of them. The coverage would come from one of a number of sources she calls the new "Health Choices Menu." The menu would include a Medicare type option and an option similar to the Federal Employee Health Benefit Program (FEHBP).
• Coverage is Mandatory: Although she calls here plan the American Health Choices Plan, you don't have a choice. Everybody must be covered by health insurance.
• Eliminate Insurance "Discrimination": Hillary Clinton wants to prevent an insurance company from setting rates based on the health of the insured, a common and sensible practice in the insurance industry (e.g., bad drivers pay more for car insurance) that she labels as "discrimination."
• Modernize Health Care to Produce Cost Savings: Clinton believes her plan can deliver health care to you more efficiently than the health care industry, and that her plan will result in annual savings of $56 billion.
• "Net Tax Cut for American Taxpayers": The plan includes refundable tax credits to help pay for health insurance. In conjunction with the cost savings, Clinton plans on paying for these credits by raising taxes on high income earners to the tune of $54 billion. Apparently, the credits are more than the increased taxes, abracadabra, a net tax cut.

How Much Will Clinton's Health Care Reform Plan Cost the American People?

Clinton's plan will cost $110 billion annually. Unfortunatley, she doesn't tell us how she arrived at that number. We don't know, for example, how many individuals will receive government assistance to pay for insurance or how much the insurance will cost. We don't know what assumptions or estimates went into her calculations or if it was based on sound projections. But we do know how she plans to fund her proposal.

Of the $110 billion annual tab, $56 billion will be covered by various cost savings and $54 billion from increased taxes. Cost Savings: The Clinton plan claims to save $56 billion annually through the phase-out of excessive Medicare overpayments ($10 billion), savings from unnecessary Medicare and Medicaid spending ($7 billion), constraining prescription drug costs ($4 billion), and modernizing the health system with Health Information Technology (HIT) ($35 billion). Tax Increases: The tax increases will come from raising the top two income tax rates and reducing deductions for health insurance on those making $250,000 a year or more. For everybody else, she claims no new taxes and lower health insurance premiums. This is where things start to get slippery, so let's proceed with caution as we take a closer look.

Clinton's Projected Health Care Savings Are Suspect

Let me make sure I've got this right--The U.S. government under Hillary Clinton's plan will teach the health care industry how to improve quality and lower costs. I don't see anything that can go wrong here, do you? Now to be fair, there are aspects of her plan that would reduce costs. For example, she proposes a phase-out of excessive Medicare overpayments to HMOs and other managed care plans ($10 billion annual savings). These overpayments are nothing new, and in fact there is at least one bill already introduced in Congress that relies on these cost savings for funding. The biggest cost savings in her plan, however, is to modernize the health care system ($35 billion annual savings). This is where the trouble begins.

Clinton relies on a consulting report by the Rand Corporation. The report, entitled, Can Electronic Medical Record Systems Transform Health Care? Potential Health Benefits, Savings, And Costs, is not unlike other IT consulting presentations I've read. You can download the report (pdf format) by clicking here. What Hillary Clinton's plan won't tell you about this report are it's many uncertainties. Here are some examples taken directly from the report:

Barriers to adoption [of the proposal] include high costs, lack of certification and standardization, concerns about privacy, and a disconnect between who pays for EMR systems and who profits from them.

The efficiencies [resulting from technology improvements] could be used to improve health care quality rather than to reduce costs.

In general, the currently useful evidence [about cost savings] is not robust enough to make strong predictions, and we describe our results only as "potential."

Clinton's plan also doesn't mention that the estimated cost savings don't fully accrue for 15 years! In fact, five years after full implementation of the technology, according to the report, annual estimated savings total just $21.3 billion, so it remains a mystery how the Clinton team included the $35 billion cost savings figure in the plan.

Finally, the Clinton plan failed to mention that much of the cost savings will come from what the RAND Report describes as "resource reduction." In other words, people losing their jobs. The RAND Report doesn't quantify the amount of job loss, although $35 billion a year can pay a lot of people. Furthermore, the loss of the jobs will only increase the number of individuals who lack health insurance. The point here is not that improved technology should be avoided because of potential job loss. The point is that Clinton should have made the American people aware of this ramification of her proposal.

Everybody Will Pay Plenty Under Clinton's Plan, Not Just The "Rich"

Clinton proposes to fund the program by discontinuing the "Bush tax cuts for [the] top two income tax brackets and [the] Bush increases in tax exemptions (PEP/Pease) for households over $250,000." She also proposes eliminating the tax deduction for health insurance premiums for those making over $250,000. Total savings--$54 billion annually. There's nothing new about taxing the "rich." It has broad appeal and is a politically safe approach. It's also misleading. The fact is everybody will pay for this plan, not just the unfortunate few who make more than $250,000 per year.

The top 20% of wage earnings currently earn 61% of the income and pay 73% of the income tax:

Should this category of wage earners pay even more taxes? I think a reasonable argument can be made that they already pay enough. But here is the important point that gets lost by the careful wording of Clinton's plan--the cost will be born by everybody, not just the "rich."

The money generated from increasing taxes on the rich could go to address the coming crisis in Social Security or Medicare. According to the Tax Policy Center, a fiscal crisis with both programs is just a few years away:

Both the administration and the CBO have projected that, under specific assumptions, current budget deficits will diminish and then disappear altogether over the next decade. In the longer run, however, retirement of the baby boom generation will cause spending on Medicare and Social Security to soar far above the payroll taxes that support it. Under current projections, Medicare spending will exceed revenues from its dedicated tax by 2010, and its trust fund will be exhausted by 2018. Social Security is in better financial shape but will reach the same landmarks in 2017 and 2040, respectively.

You can read the full report from the Tax Policy Center here. Given the crisis we face with Social Security and Medicare, it would be fiscally irresponsible to undertake yet another health care program costing (under very rosy assumptions and projections) in excess of $100 billion annually. The $54 billion raised under Clinton's proposal could go to address, in part, the coming crisis with Social Security and Medicare. The point is, the middle class shouldn't get too comfortable with Clinton's plan--all will pay for it one way or another.

Will Clinton's Plan Provide Health Insurance to Undocumented Immigrants?

One would expect this question to be an easy one, or at least one Clinton could answer. She can't. In an interview after unveiling her plan, Clinton's senior policy advisers stated that the plan doesn't include any details on whether illegal immigrants will be covered. Senior policy adviser Laurie Rubiner said, "That's one we're going to have to think through a little bit." Given that there are an estimated 12 million undocumented immigrants in the United States, Clinton's policy advisers had better think real hard. Assuming that most of this group are uninsured and assuming that many lack the means to pay for insurance, this issue has the potential to dwarf Clinton's current $110 billion annual cost guesstimate.

Clinton's Plan to End Insurance "Discrimination"

When you buy health insurance through your employer, you generally pay the same as your co-workers. And you pay the same regardless of your health condition. So, for example, a 70 year old smoker would pay the same premium as a 20 year old in great physical health. Insurance companies accomplish this through pooling the risk of a large number of insureds. What's really happening here is that the 70 year old is paying less than if he or she bought health insurance on their own, and the 20 year old is paying more. Is that fair? No, but it works. Now, if you go to buy health insurance on your own, you are no longer part of a large pool of insureds. As a result, your premiums will be based on your health condition, not unlike when you go to buy life insurance on your own. And if you're in really bad shape, you may not find an insurance company to issue you a policy. According to Hillary Clinton, that's discrimination.

The problem is, it ain't. At least it's not discrimination in any meaningful sense of the word. I guess I "discriminate" when I choose one store over another because of lower prices or better quality. Or insurance companies discriminate when they charge dangerous drivers more for insurance than they charge safe drivers. The point is that if Clinton wants to propose insurance pooling, she should just say so. It means that in all cases the healthy will pay more for insurance than they otherwise would, and the not so healthy will pay less. But of course, describing it that way doesn't sound so appealing, thus, we get her plan to "eliminate discrimination."

So now it's your turn. What do you think of Clinton's plan?