Orange County, Calif., Financial Experts Like Bush Concepts

The Orange County Register, Calif

Mary Ann Milbourn

January 22, 2003

Jan. 22--Orange County financial experts on Thursday welcomed President George W. Bush's latest proposals for health-care savings and private investment of Social Security funds, provided the changes are simple enough for people to take advantage of.

The health insurance proposals come as new polls show that health-care costs are among Americans' top concerns, while the Social Security plan is a response to growing pressures on the trust fund as baby boomers near retirement age.

Details remain sketchy for the financial reforms, which Bush proposed in his State of the Union speech Tuesday. Experts said that, with the national elections in November, they aren't likely to pass the divided Congress this year. They could, however, be the basis for changes in the future.

A last-minute addition to the Medicare bill approved by Congress last month allows people with catastrophic-care insurance to put money, tax-free, into special accounts that can be used to pay health costs not covered by the high deductible.

Under Bush's plan, people enrolled in these plans would be able to deduct 100 percent of their premiums. If approved, an estimated 3 million people could take advantage of it by 2013.

Bill Geideman, a Santa Ana enrolled agent, said this would be a great tax benefit for people who have to buy their own health insurance, provided not too many strings are attached and the insurance plans are affordable.

"I would hate to see them set up with so many restrictions that no one can use them," he said.

This tax-credit recommendation, which has been proposed for two years, targets the other end of the financial spectrum -- low-income workers who can't afford health insurance. The plan would give a refundable tax credit of up to $1,000 for individuals and $3,000 for families to buy basic health insurance. The credit would phase out for individuals with $30,000 in income and families at $60,000.

Gary Capata, a certified public accountant in Laguna Niguel, likes this idea, at least in concept, because it would help people who otherwise might not be able to afford health insurance.

He worries, however, that it could end up like the earned-income tax credit, which gives a tax refund to workers whose income is so low they don't pay taxes. Critics say the earned-income credit isn't used by many people who most need it because it is so complicated, and it opens the door for fraud by people who know how to use the system.

"You don't want (a situation) where people don't understand (the health insurance tax credit) and don't claim it even though they are entitled to it -- or they understand it and claim it but aren't entitled to it," Capata said.

Bush proposed allowing workers to invest a portion of their Social Security taxes during his first presidential campaign, but the idea sank after the stock market bubble burst. With the markets on the rebound, he's recommending it again.

"I'd love to have this option," said Scott Dauenhauer, a Laguna Hills certified financial planner who specializes in retirement planning. "Social Security is in terrible shape and something has to be done about it."

If this proposal is enacted, he said, it would be crucial for workers to be educated about proper diversification so they don't make investment mistakes like the Enron and WorldCom employees who had all their retirement invested in their company's stock, only to lose it in bankruptcy.

"The people who (lost their money) in Enron and WorldCom weren't diversified," he said.

--Register news services contributed to this report.

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(c) 2004, The Orange County Register, Calif. Distributed by Knight Ridder/Tribune Business News