Tax cuts or health care?

Democratic primary voters now have a clear choice: subsidized taxes to provide health care for all Americans versus lower taxes on the middle class. Barack Obama’s promise this week to deliver up to $85 billion in annual tax relief for middle-class Americans is the type of plan that has the potential to stop the so-called Unstoppable Hillary.

The guts of Sen. Obama’s plan is to offer a $1,000 annual tax credit for middle-class American families with two earners. This, he says, would cut taxes for 150 million Americans or roughly half the population.

Then he would grant a mortgage credit of 10 percent for homeowners earning up to $50,000 per year or a cut for them in taxes of roughly $500 annually. Third, he would eliminate income taxes on retirees making less than $50,000 per year. And he would cut the paperwork burdens associated with filing tax returns in some instances.

Obama says the driving forces behind the plan are to redress the country’s “widening economic inequalities” and to assist victims of the subprime mortgage crisis. He plans to pay for these cuts by closing offshore corporate tax havens, eliminating tax loopholes and raising the capital gains tax from the current 15 percent to as much as 28 percent.

Sen. Hillary Rodham Clinton, on the other hand, took her big gamble this week by revisiting the issue of health care, which she so famously bungled when her husband was president. She envisions a $110 billion care system, a revamped media-dubbed HillaryCare package that would cover 47 million uninsured Americans without needing a middle-class tax hike, new bureaucracy or burdening small-business owners.

The gist of her plan is to require everyone to enroll in his or her choice of publicly financed or private insurance plans, depending on income, and setting it up so that a patient would never lose “affordable” coverage, even if unemployed.

I’m all for cutting taxes and I’m all for making it easier on hardworking middle-class Americans. But there are some major-league rubs in Obama’s plan. The first question with Democrats is always: How do they define “middle class”? For Obama, it seems to be families making up to $75,000 per year. A family of four living on that much money in Fallon, Nev., would qualify as upper middle class if not, in some circles, as upper class. But a family of four trying to live on that amount of money in Manhattan or Los Angeles or San Francisco or Chicago would not be making it, period. In other words, Democrats’ definitions of “middle class” must be thoroughly examined and radically altered to be brought into reality.

Second, Obama’s plan does nothing to change the main tax plague of the American middle class, which is the Alternative Minimum Tax (AMT). There was talk in Congress last year of eliminating it, but that never came to pass. Eliminating the AMT is the only way to truly help the growing number of middle-class Americans whose taxes go up astronomically as a result of the AMT.

According to the Urban Institute, it is a financial albatross on some 23 million to 24 million Americans.

As to HillaryCare, part of her grand plan to give all Americans access to health care includes an expansion of federal regulations on health insurers and mandates on large companies to provide insurance coverage or pay higher taxes. Conservatives believe these regulations will raise the cost of private insurance higher and that, in turn, would harm Americans who are personally responsible enough to provide coverage for themselves and their families.

Clinton’s plan also, according to Michael Cannon of the Cato Institute, increases dependency on already overburdened federal programs, including Medicare, the SCHIP program for poor children and the Federal Employees Health Benefits Plan. All this means higher taxes for — guess who? — you and me. And what other commentators won’t tell you but I will, is that the more we boost government benefits, the more we lure illegal immigrants into the United States. Think about it: free health care in addition to free public school for kids. Why wouldn’t the numbers increase?

So as between the two, I think Obama is headed in the better direction. But he needs to revamp and expand his tax-cut plan.

(Bonnie Erbe is a TV host and columnist. E-mail bonnieerbe(at)