New Study: End the Tax Exclusion, Return $1 Trillion to the Workers Who Earned It

Michael F. CannonThanks to an accident of history, the U.S. tax code treats employee health benefits differently from cash wages. The “tax exclusion” for employer‐​sponsored health insurance shields workers from having to pay income or payroll taxes on compensation they receive in the form of health benefits.Economistshate the tax exclusion. It has done enormous harm to workers, patients, and overall economic productivity. It has literally ruined lives. Eliminating that tax differential may be the single most important thing Congress can do to make health care better, more affordable, and more secure.At the same time it harms workers, however, the exclusion benefits powerful interest groups. It gives large employers and unions an advantage over their competitors. It compels workers to channel $1.3 trillion annually to human ‐​resources professionals, health insurance companies, and health care providers. It penalizes workers if they attempt to limit that spending. Those groups denounce any effort at reform. It doesn’t help that every reform attempt to date would have raised taxes on significant numbers of workers . Finally, policy wonks obstruct reform by describing the exclusion in ways that hide how it works, how it harms workers, and the benefits of reform.Every president since Ronald Reagan has tried to limit or eliminate the exclusion. All have failed.Today, the Cato Institute releases a  new study, “End the Tax Exclusion for Employer ‐​Sponsored Hea...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs