Times have changed. Fringe benefits are now properly considered part of the total employee compensation package. These employer health insurance contributions should be recognized as taxable employee compensation for the purposes of employee payments to the IRS and OASI. The proposal to provide a tax credit to the employee is a suitable offset, in those cases where an employee’s total compensation includes the (newly taxable) employer health insurance contribution.

Of course, in the cases where an employee does not have a health plan with employer contribution, the employee can use the tax credit to offset his purchase of health insurance.

I note that the employer’s contribution would now also be subjected to the employer’s share of OASI tax. The employer’s health insurance payments were already deductible for its taxable profits calculations. This appears to increase the cost to the employer of providing health care, and may require a shift to the employee of some of the premium cost, again justifying the employee tax credit proposal. (Alternatively, the plan might have higher copays, etc.)

The explanations of the Obama plan remind me of watching a very elegant Argentine tango.