Congressional Republicans are gearing up for a battle over tax reform. Nearly everyone in the caucus would like to slash corporate and individual taxes. But they will need to close some loopholes in the tax code if they hope to offset the revenue they will lose by lowering rates.
One of the sacred cows Republicans ought to target is the "employer exclusion," which exempts employer-sponsored health benefits from income and payroll taxes. By effectively subsidizing health insurance, the exclusion has exacerbated our nation's health cost crisis.
Taxing health benefits would make America's health insurance market fairer and more economically efficient. The exclusion is a relic of the World War II era, when employers began offering workers generous health benefits to get around government wage and price controls.
Before then, most people did not receive health insurance through their jobs. The employer exclusion has since become the single largest break in the tax code. This year, the federal government will forego about $350 billion because of the exclusion.
Businesses understandably want to preserve this loophole, which helps them recruit and retain workers. Employees like the loophole as well. To them, a dollar of tax-free health benefits is worth more than a dollar of taxable income.The exclusion might be popular but it is bad public policy.
First, it is deeply unfair to Americans whose employers do not offer health coverage. Many of these folks do not receive a subsidy to buy their own policies on the individual market.
Second, it distorts the labor market. Over 155 million people receive health insurance through their jobs. By tethering health insurance to employers, the government has made it less likely these folks will seek out new jobs or start their own businesses, since they would have to give up their health plans.
Third, it is highly regressive. In 2016, the top two-fifths of earners received nearly 70 percent of the benefit from the tax break. The bottom fifth of the income distribution, meanwhile, captured one-half of 1 percent of the exclusion's benefits.
Worst of all, the loophole drives up health costs. When employers pick up most of the cost of coverage "first dollar coverage" people have less incentive to consume health care responsibly. This leads to wasteful spending that inflates insurance premiums.
The average employer contribution to a family insurance plan more than tripled percent between 1999 and 2016, rising from $4,247 to $12,865. The explosive growth in premiums has left businesses with less money for wages. Combined salaries, wages, and bonuses increased just 58 percent from 1999 to 2015.
In short, the federal government is sacrificing hundreds of billions of dollars a year to subsidize needlessly lavish health coverage for wealthy folks. It's hard to imagine a loophole more deserving of the axe.
It would be politically impossible to do away with the loophole all at once. But Republicans could start the reform process by capping the exclusion at $8,000 for individual plans and $20,000 for family plans. These limits are slightly higher than the average premium for an employer-sponsored plan. So the majority of workers wouldn't be affected.
To keep up with the gradual rise in healthcare costs over time, these caps could grow at the inflation rate plus 1 percent. Such a reform would not ban employers from offering extravagant health benefits. But it would stop subsidizing such decisions with taxpayer dollars.
Many employers would respond by sponsoring less comprehensive high-deductible plans, and pay workers higher wages instead. These high-deductible plans, especially if paired with tax-advantaged Health Savings Accounts, would encourage workers to shop around for health care. And that would put downward pressure on overall healthcare spending.
It's time for Congress to restore some fairness and fiscal discipline to our health care sector by capping the employer exclusion. Lawmakers could use the tens of billions in new revenue to finance permanent tax cuts that boost economic growth, increase wages, and create jobs.
Sally C. Pipes is president, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is "The Way Out of Obamacare" (Encounter 2016). Follow her on Twitter @sallypipes.
See the original post:
GOP can improve health care and lower taxes | Opinion - Sun Sentinel
- How good is fish for your diet? - November 8th, 2009 [November 8th, 2009]
- What foods have both fiber and protein? - November 8th, 2009 [November 8th, 2009]
- Is There Evidence That Acupuncture Works? - November 8th, 2009 [November 8th, 2009]
- What are some good fiber foods? - November 8th, 2009 [November 8th, 2009]
- Can Green Tea fight HIV infection? - November 8th, 2009 [November 8th, 2009]
- Quality of GNC Supplements - November 8th, 2009 [November 8th, 2009]
- The Gene Smart Diet - November 8th, 2009 [November 8th, 2009]
- Tips for eating in a vegetarian lifestyle - November 8th, 2009 [November 8th, 2009]
- Regarding the Starting of a new diet regimen - November 8th, 2009 [November 8th, 2009]
- Thoughts on Dropping Weight - November 8th, 2009 [November 8th, 2009]
- What do doctors think about vitamin E supplements? - November 8th, 2009 [November 8th, 2009]
- What herbs or supplements are commonly used for depression? - November 8th, 2009 [November 8th, 2009]
- Is there a safe way to lose a lot of weight? - November 8th, 2009 [November 8th, 2009]
- Diets that promise you will lose weight - November 8th, 2009 [November 8th, 2009]
- Are Fish Toxins Linked to Diabetes? - November 8th, 2009 [November 8th, 2009]
- Can Plastic Surgery Help Migraines? - November 8th, 2009 [November 8th, 2009]
- Weight Loss Surgery Eradicates Diabetes Symptoms - November 8th, 2009 [November 8th, 2009]
- Found: A Gene That Controls Fat Cells - November 8th, 2009 [November 8th, 2009]
- Sugars and Starches, what's the difference? - November 8th, 2009 [November 8th, 2009]
- Improving your health with a serving of nuts? - November 8th, 2009 [November 8th, 2009]
- Is Your Diet Causing You To Be Depressed? - December 13th, 2009 [December 13th, 2009]
- Placebo Effect: Magnetic Bracelet Therapy - December 13th, 2009 [December 13th, 2009]
- Does serotonin promote sleep? - December 13th, 2009 [December 13th, 2009]
- Decreased energy levels - Overeating, Sleep, Nutrition - February 1st, 2010 [February 1st, 2010]
- When will the body begin to cannibalize muscle tissue? - February 7th, 2010 [February 7th, 2010]
- Foods that are high in antioxidants - February 7th, 2010 [February 7th, 2010]
- Editorial: Reduce health care costs by cutting administrative overhead - April 1st, 2012 [April 1st, 2012]
- Health Care Winners: Centene, Onyxx - April 25th, 2012 [April 25th, 2012]
- Dan Morain: Nurses union puts politics ahead of health - April 25th, 2012 [April 25th, 2012]
- What's next if Obamacare falls? - April 25th, 2012 [April 25th, 2012]
- Global Managed Health Care Services Industry - April 25th, 2012 [April 25th, 2012]
- Immigration Fight Echoes Health-Care Case at High Court - April 25th, 2012 [April 25th, 2012]
- Medical Centers Lead Workplace Wellness Effort - April 25th, 2012 [April 25th, 2012]
- The next health care overhaul? Look to employers - April 25th, 2012 [April 25th, 2012]
- Capital BlueCross Hosts Community Health Care Forums Focused on Managing Costs While Maintaining Quality - April 25th, 2012 [April 25th, 2012]
- County committee to look at area health care - April 25th, 2012 [April 25th, 2012]
- President Obama Calls on Students to Tell Congress: #DontDoubleMyRate - Video - April 25th, 2012 [April 25th, 2012]
- Sen. Coburn: Competition in Health Care to Allocate Resources - Video - April 25th, 2012 [April 25th, 2012]
- Jesse Kelly health care - Video - April 25th, 2012 [April 25th, 2012]
- PHC Vision Statement (short version) - Video - April 30th, 2012 [April 30th, 2012]
- The Bioeconomy Blueprint Panel - Video - April 30th, 2012 [April 30th, 2012]
- Providence Health Care's Vision Statement - Video - April 30th, 2012 [April 30th, 2012]
- Department of Health and Human Services: Minority Health Blogger Townhall - Video - April 30th, 2012 [April 30th, 2012]
- Health care worker accused of stealing identities of brain i - Video - April 30th, 2012 [April 30th, 2012]
- Health Care Reform, Part 1 of 3 | KYVE Insiders Roundtable - Video - April 30th, 2012 [April 30th, 2012]
- Health Care Reform: The ACA and Beyond - Video - April 30th, 2012 [April 30th, 2012]
- Is Broccoli Like Health Insurance? - Video - April 30th, 2012 [April 30th, 2012]
- Did Obama make a mistake on health care? - Video - April 30th, 2012 [April 30th, 2012]
- How Democrats Lie About Health Care - Video - April 30th, 2012 [April 30th, 2012]
- Toobin on Health Care: This was a "judicial hissy-fit" - Video - April 30th, 2012 [April 30th, 2012]
- President Obama says health care law will stand - Video - April 30th, 2012 [April 30th, 2012]
- Obama Defends Health Care Law From 'Judicial Activism' - Video - April 30th, 2012 [April 30th, 2012]
- Obama Healthcare Individual Mandate - Video - April 30th, 2012 [April 30th, 2012]
- President Obama attacks Supreme Court on health care - Video - April 30th, 2012 [April 30th, 2012]
- Raw Audio: High Court Dissects Health Care Act - Video - April 30th, 2012 [April 30th, 2012]
- Health care on trial - Video - April 30th, 2012 [April 30th, 2012]
- Final Day of Health Care Law Arguments Before Supreme Court - Video - April 30th, 2012 [April 30th, 2012]
- Feds to put up $1.9B for Oregon health overhaul - May 4th, 2012 [May 4th, 2012]
- Scuttling health care act will freeze Medicare, White House warns - May 4th, 2012 [May 4th, 2012]
- U.S. Health Care Spending High, But Quality Lags: Report - May 4th, 2012 [May 4th, 2012]
- Yes, the Health-Care Mandate Is About Liberty - May 4th, 2012 [May 4th, 2012]
- Health center gets $1M federal grant - May 4th, 2012 [May 4th, 2012]
- Health-care reform panel considers exchange options for Va. - May 4th, 2012 [May 4th, 2012]
- Hmong health care gap focus of Healthy House dinner - May 4th, 2012 [May 4th, 2012]
- Walsh-led health bill to be unveiled - May 4th, 2012 [May 4th, 2012]
- Ontario health system confusing for ailing seniors, study finds - May 4th, 2012 [May 4th, 2012]
- 'Health Care Deserts' More Common in Black Neighborhoods - May 5th, 2012 [May 5th, 2012]
- With federal money, Oregon kicks health care reform into high gear - May 5th, 2012 [May 5th, 2012]
- Nurse practitioners tackling more 'doctor' tasks - May 5th, 2012 [May 5th, 2012]
- Konza Prairie Health Center Receives $4.5 Million Grant - May 5th, 2012 [May 5th, 2012]
- Alberta wages hurting Sask. health care - May 5th, 2012 [May 5th, 2012]
- House releases plan to cut growth of Massachusetts health spending in half - May 5th, 2012 [May 5th, 2012]
- Mass. House Will Unveil Bill Seeking To Rein In Health Costs - May 5th, 2012 [May 5th, 2012]
- President Obama Welcomes the Kentucky Wildcats - Video - May 5th, 2012 [May 5th, 2012]
- President Obama Speaks on College Affordability - Video - May 5th, 2012 [May 5th, 2012]
- My First Job: Gene Sperling - Video - May 5th, 2012 [May 5th, 2012]
- Health-care costs worry near-retirees - May 7th, 2012 [May 7th, 2012]
- Massachusetts Institutes Health-Care Price Controls. Is America Next? - May 7th, 2012 [May 7th, 2012]
- Massachusetts Moves Toward Health-Care Price Controls. Is America Next? - May 7th, 2012 [May 7th, 2012]
- GOP plan boosts Pentagon, cuts social programs - May 7th, 2012 [May 7th, 2012]