In 1992 the first President Bush's budget was at the printer when congressional Republicans revolted. Bush, they were told, planned to fund expanded health coverage by leaping on one of American politics' "third rails": the fact that the value of employer-provided health benefits is not included in employees' taxable income. Making a portion of these benefits taxable, Bush the Elder reckoned, was a smart way to pay for health care for folks who had none. But G.O.P. leaders were apoplectic. Didn't Bush understand that a tax hike meant political death? The uproar was so swift and furious that White House staffers spent the night using razor blades to excise the offending page from printed budgets.

First George W. Bush went to Baghdad when his daddy wouldn't. Now, with the health-care plan the President floated in his State of the Union address, he's literally picking up a page his father wouldn't keep in his health-care playbook. But the son has shrewdly disguised his slow-motion tax increase as a tax cut.

Here's how. To make health care more affordable, Bush wants to create a standard deduction for health insurance like the one offered for dependents. Families with private health plans would have their first $15,000 in earnings exempt from taxes (for individuals, it's $7,500). The idea, Bush argued sensibly Wednesday night, is to "level the playing field" between today's tax-advantaged employer-provided benefits and those purchased outside the workplace, where growing numbers of Americans seek coverage. But Bush would offset these new deductions by taxing employer-provided benefits above that $15,000 (or $7,500) level. The White House guesses that in the first year 30 million people (whose employer plans are richer than the deduction) would see their taxes rise as a result, while 100 million would see their taxes reduced. Yet here's the trick: these numbers would reverse over the next decade, because the value of the deductions will be indexed to rise only with inflation, while health premiums, rising faster, will leave more people facing the new tax...

Still, if Democrats are right to dismiss Bush's overall plan as too little, too late, they're wrong to dis his call to reform today's regressive health-tax exclusion. A nearly invisible $200 billion subsidy that tilts its largesse toward executives in high tax brackets and workers who already have rich plans would normally be assailed by liberals as unjust. But because this particular subsidy bolsters hefty benefits negotiated by their union allies, Democrats overlook the inequity. "It's ironic and embarrassing," says Len Nichols, a former Clinton health official now at the New America Foundation...

For the complete article, please visit the TIME Magazine website.