The Republican House bill to replace ObamaCare has been criticized because it gives tax credits to those who cannot afford health insurance to purchase health insurance. ObamaCare used subsidies to pay for those who cannot afford health insurance.

The argument is that there is no difference between tax credits and subsidies.

The criticism is logical in that both credits and subsidies means that the federal government redistributes income by use of the tax code to help some buy health insurance. With a subsidy, the premium is lower; with a tax credit you receive the money to buy health insurance. But the fact that it is logical does not meant that it is a valid reason to oppose the Republican plan.

The federal income tax system is based on the premise that all income is subject to definition, taxation, and redistribution by the federal government.

The federal income tax system is a means to redistribute income by allowing deductions and credits for certain activities.

If you own a business, you can deduct the cost of health insurance for yourself and your employees. You reduce your gross income by the cost of health insurance to arrive at taxable income. Under the premise of the tax system, you are receiving a form of a subsidy because the government is allowing a deduction that reduces your taxable income. The federal government could eliminate this deduction so that businesses and self-employed would pay tax on gross revenues. In fact, some of the proposals for a flat rate income tax, with no deductions, would eliminate deductions and credits thus requiring payment of tax on the gross receipts of businesses, and gross income of individuals.

The tax code has credits for college education, adoptions, child care, home insulation, certain cars, and other tax-favored activities, all based on income. In addition, favored companies, such as Solyndra that contributed to Obama’s campaign, receive generous federal credits, or a bailout like GM, or favorable loans like Chrysler in the 1970s. The income tax code is a vehicle for social engineering as much as it is a vehicle to raise revenue. The only way to end this is to abolish the income tax and replace with a sales tax.

Given this use of the tax code, and looking at the over three trillion dollars wasted by Bush and Obama on nation building in Iraq and Afghanistan, the attacks on the Republican bill that it gives tax credits to poor Americans to buy health insurance rings hollow.

Further, there is a significant difference between the ObamaCare subsidies and the Republican tax credits. While both involve money from the federal government’s redistribution, tax credits should allow each person to purchase the health insurance plan suitable for the person. Under ObamaCare we are limited to basically three or four plans that vary only in the amount of deductible and amount paid for bills.

The credits may bring down premium costs only if there is competition across state lines, with insurers being able to offer plans with a cafeteria-type selection of coverage. For example, you should be able to buy a simple plan that covers surgery, diagnostic tests, and have a high deductible for you to self-insure for routine care such as office visits. Or you can buy a plan that pays every cost, or some variation thereof.

Now we have no choice -- we have to take the plan offered. In my state, my choice when I purchased health insurance was the Gold, Silver, or Bronze plan that differed only in the deductibles and amount paid, not the coverage afforded. Most purchased the Silver plan.

It is common economic sense to allow the consumer to purchase the plan that is suitable for his needs, and to allow insurers to offer plans where one can select the coverage. This is the key to market competition.

Premiums will not decrease if we do not have this competition. There must be competition among insurers nationwide, with the consumer free to choose what he wants to pay for.

The credits should be based on income. This is no different than giving vouchers to parents to use to send their children to the school they choose, whether private or public school. Conservatives are all in for vouchers but some now oppose tax credits to purchase health insurance, and threaten to derail the Republican plan. Conservatives have argued that giving parents vouchers for education will improve the schools because of competition, and more importantly will benefit the children to receive a better education. Giving credits to poor Americans, not covered by employer paid health insurance, will similarly improve competition among insurers and benefit poor Americans. Employees who receive employer paid health insurance are receiving a form of subsidy paid by all taxpayers because the employer receives a deduction for the premiums. The tax rates reflect the deductions and credits taken by all taxpayers.

What is the realistic, practical difference between vouchers for education and tax credits for health insurance?