Wednesday, February 01, 2006

Briefly on Bush's HSA proposal

I've certainly seen worse things come out of this Administration. E.g., the plan does address some genuine anomalies in existing law, such as the more favorable treatment of insured than uninsured routine coverage, and the difficulty of replicating the benefits of tax-free employer-provided plans if you don't have a large enough pool of employees to satisfy the insurance company's taste for diversified risk.

But of course it figures that once again, as always, the answer is more tax cuts. Also, although the short-term budget picture doesn't show the difference, HSAs that are permanently tax-free have a larger long-term budgetary cost than tax-free savings accounts that merely defer income.

One question I would ask myself before establishing an HSA, if I didn't expect to use it for a while, is how confident one should be, in the face of an enormous fiscal gap, that currently promised future tax benefits will actually be there when one is ready to use them.

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