Health Plan Deduction Cuts Social Security

By Elizabeth Auster
The Cleveland Plain Dealer

Saturday 27 January 2007

Washington - A little-noticed part of President Bush's new health insurance proposal could pose a sticky question: Is it worth getting a tax break for health coverage if it means you will end up with smaller Social Security checks when you retire?

Bush's proposal to create a tax deduction for health insurance, if enacted into law, could reduce Social Security benefits for many Americans because the deduction would apply not only to income taxes, but also to payroll taxes that go to Social Security. While most workers might welcome a cut in payroll taxes, the flip side is the less they pay into Social Security, the less they can collect when they retire.