Community | July 21, 2009 | 5 comments

The Case Against the Case Against Taxing Health Benefits

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atomiclegion
As is frequently the case, the economically optimal and politically optimal strategies diverge on how to pay for health care. I have argued that the high-income surtax, such as has been proposed in the House's version of health care reform, is liable to meet less resistance than most other payment mechanisms (although surely it will meet some). I have further argued that there ought to be at least one or two additional tax brackets above the current maximum of about $350,000 -- that a multimillionaire should be taxed at a higher rate than someone making "only" $360,000. The surtax would provide for that too.

However, this is not the economically optimal way to pay for health insurance. Changing the tax code in this way is not liable to resolve any inefficiencies (that is, generate any cost reduction), nor does it have anything in particular to do with health care itself. An alternative that would meet both those criteria would be to remove the preferential treatment for employer-provided benefits like health insurance, which almost certianly does distort the market and increases the cost of health care.

Many serious reform proposals include a removal of the benefits subsidy. However, such a move would undoubtedly be politically unpopular, and so Congress is likely to decide to finance health care through other means. I can live with this: ultimately there is just about no way that high-income earners are going to get through the next decade or two paying the 35 percent marginal tax rate that they're paying now, and so at most this is pushing forward an inevitable future tax increase.
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5 comments // The Case Against the Case Against Taxing Health Benefits

  • JonRaymond
    • 0
      JonRaymond  
    • It makes sense to tax the rich. Rich people are not rich because they work harder or sacrifice more. It's quite the opposite. The rich are rich because they were born that way, or they had opportunities that others didn't, which stems from things like race, class, and location. A poor black woman has a hundred times less of the same chance that a rich white male has at any kind of success in our sexist racist society.

      It is true that people without opportunities can make them and become successful. But they have to work ten times harder than someone with the opportunities does. And so very few ever get there.

      Therefore, because of this blatant obvious inequity the rich should certainly be taxed at higher graduated rates than others. Until racism, sexism and classism end and all people have the same opportunities then the arguments against this don't hold water.

    • 2 years ago
  • VoyagerFilms
    • 0
      VoyagerFilms  
    • The joke is that people who make millions pays more in taxes.

      Truth is, the wealthier a person is, the more loop holes and right offs they are able to take advantage of. So, when we are all able to right off a trip in my private jet to exotic locations as a corporate expense - then maybe so.

    • 2 years ago
  • JK47
    • 0
      JK47  
    • I think we should stop outsourcing costs of healthcare to insurance companies. I think we need to put doctos in large groups who can come up with the funding to have multi-disciplinary facilities where you pay a flat rate for having your health care handled, no matter what. This seems like it would cut out a lot of middle men and people getting paid for redundency. Why should an profit driven insurance company be calling the shots... that's what happens when they have the money. Let's eliminate the need for insurance companies and have the companies of whatever they insure assume the burden. I bet it would work... just a thought. They may come try to kill me after this post.

    • 2 years ago
  • JK47
    • 0
      JK47  
    • So you think because a person makes millions, he should be taxed more than someone who makes 350,000? I disagree.... I feel like that is a negative reinforcement for being successful. If you want to be lazy and just get by.... that's your choice.... but don't penalize the people who aspire to do more. Behavior like that should be rewarded. Tax the same % for everyone and cut some beurocratic bullshit out of the equation. The govt. is like a jealous gf with money. It is constantly coming up with ways to milk it out of its citizens. The only thing the govt. should be paying for is education, national defense and transportation. We should be taxed for those things only. Not the 10,000 dollars gold plated toilet paper that they wipe their ass with!

    • 2 years ago
  • JonRaymond
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