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  • What Real Bipartisan Health Care Reform Looks Like

    The Washington Post editorializes today:

    Unlike wages, health coverage is not subject to income or payroll taxes. This exclusion is the single largest subsidy in the tax code; it is projected to reduce federal tax revenue (both income and payroll taxes) by more than $200 billion next year. This arrangement is not only costly, it is also unfair. Because higher-paid workers are taxed at higher rates, they enjoy a larger benefit from not having to pay taxes on the health insurance they receive. Furthermore, the exclusion is counterproductive: tax-free health benefits encourage employers to provide more compensation in the form of health insurance and encourage insured individuals to use more health care than they would if they had to pay with after-tax dollars. The result is higher health-care costs.

    We couldn’t agree more. Heritage fellows Greg D’Angelo and Robert E. Moffit wrote in March:

    If there is one area in health policy where there is a powerful consensus among serious analysts, conservative and liberal alike, it is the need to change the existing tax treatment of health insurance. President Ronald Reagan first proposed a change to the tax law governing health insurance in 1983, but Congress never acted on the proposal. Six years later, analysts at The Heritage Foundation unveiled a national health reform proposal grounded in comprehensive tax reform. Now, the idea could—depending on its details—potentially serve as the basis of a bipartisan compromise on health reform in the coming months.

    The current tax treatment of health insurance is a byproduct of wage and price controls imposed by the Roosevelt Administration during the World War II era. The federal tax code currently excludes, without limit, the value of employer-sponsored health insurance from an individual’s income for the purposes of both income and payroll taxes. This tax exclusion for employer-sponsored insurance is a huge, but hidden, tax subsidy. The Joint Committee on Taxation estimated that value of the tax exclusion in 2007 was $246.1 billion in foregone income and payroll taxes.

    The tax treatment of health insurance also has the perverse effect of increasing health care spending and driving up costs by essentially lowering the effective price of employer-sponsored health insurance. The exclusion does encourage individuals to obtain insurance. But it also encourages many individuals to have more generous insurance than they typically need, because the higher the cost of the insurance and the higher the person’s income, the bigger the tax benefit for the individual

    The best way to change the current tax treatment would be to replace the existing tax exclusion with a more equitable and efficient system of individual tax relief, leveling the playing field for robust competition among insurers and creating a level of consumer choice that is routine in every other sector of the American economy.

    Short of that, Congress could limit or cap the exclusion, perhaps only for income tax purposes, while simultaneously using the new revenue to provide health care tax credits for taxpaying households.

    Posted in Obamacare [slideshow_deploy]

    13 Responses to What Real Bipartisan Health Care Reform Looks Like

    1. Jeff Fraser, Corona says:

      With the tea partiers and tax revolters gaining momentum it would great if you could produce a series of downloadable policy papers in single page flyer or tri-fold layout for distribution. A "free market health care reform" piece would be great for distibuting at events.

      Of course, short Youtube videos on this subject would be helpful as well.

    2. Larry, in the Republ says:

      Wow! Are Y'all listening to the words that are actually coming out of your mouths, or off this page as it were? HOW much can an employer paid health plan ACTUALLY cost in tax revenues? The way that it's being explained here makes it sound like ALL wages are being exempt instead of ONLY the money it cost to provide "Health Coverage". Company paid Health insurance "used" to be condidered an "employee benefit" and part of the compensation package. What's the matter with that system now, all of a sudden? Are the UNIONS getting a little stronger through "CLUB CHICAGO" rule? Now they don't even want to pay for their "take our HEALTH PLAN" or nothing policy? I for one would like to hear some discussion and FACT finding on this issue. Let's snatch up some rugs and see what's been swept under 'em! Now, for those of us who don't PAY someone else, like a UNION, to tell us what we need, I'll move on. I mean seriously, will a person who makes 200K dollars a year get THAT much better insurance than a person who makes only 80K, and works for the same company and has insurance through the SAME carrier? Let's keep the apples in the apple barrel and vise versa. Is a 70/30 policy better than a 90/10? It can be if your out of pocket is less for every Doctors visit and all you usually do every year is go to the Dr. for flu shots and the like! Basically, you pay for what you get. Also, if you're not forced to meet a predetermined deductable out of your own pocket first, to compensate for the TAX BREAK,then it's a better deal. I just don't get your logic in claiming that wealthier workers, by nature of making more in compensation, get a better tax break strictly through the health care plan of their choosing. If their plan was costing an average of 40% of their total compensation as opposed to someone who makes considerably less compensation, and only pays (or has paid on their behalf) say, 15% of their total compensation I could see your point. That is, IF the coverage, copay, deductables and "Escrow" were all otherwise identicle. Please clear this up some for me!

    3. MAS1916 - Denver, CO says:

      Tax Relief! What a concept!

      Lowering the cost of doing business increases movement of money and capital through the economy. This creates more income and more revenue to the government.

      Interesting that the phrase bipartisan arises here though. Usually, anything resembling tax relief is automatically thrown out by the left. Someone at the DNC must be asleep at the switch. If Democrats were smart, they would accept this compromise and just claim it as their own.

      Democrats usually define 'bipartisanship' as an action where conservatives cave in to liberal wishes. Then when unintended consequences arise, liberals are able to point to conservatives and claim the problem was jointly created. Democrats have laid several of these bipartisanship traps around DC that the GOP must absolutely avoid. (for a list of the 'bipartisanship traps' you can look at:
      http://firstconservative.com/blog/political-humor… )

    4. Larry-in the Republi says:

      Dude, where's my post comment? Must have been hyjacked by a new Liberal Foundry "proofreader"!

    5. Pingback: » Financial News Update - 05/19/09 NoisyRoom.net: “Extremism in the defense of liberty is no vice. Moderation in the face of tyranny is no virtue.” Barry Goldwater

    6. Barb -mn says:

      Some haven't had a raise increase in eight years as their health insurance is paid through the employer, increase health costs is always the excuse. Eight years w/out an increase. With government growing = taxes increasing = prices increasing, eight years! And Obama doesn't think we've been sacrificing? Medical and dental bills already include a state health tax that pays for those that don't pay their own.

      Just because he wants to aid and comfort, (with the money of the responsible), the irresponsible instead of holding them accountable to their responsibilities as human beings…it's all government. It was the freedom of choice to take the benefit of health insurance at a cost one way or another… eight years… our income with children is less then a part time legislator and their amenities.

    7. B J Vanderlip says:

      People shouldn't listen to Obama, INSTEAD WATCH WHAT HE DOES. that tells the whole story. Just wait until ALL he has done to us comes down the tubes.

    8. Chuck Plano, Tx says:

      I can't believe that this is something that the Heritage Foundation would be supporting. I have worked for large Corporations and for the past 16 years i have run my own business and as income goes up usually the deductable and out of pocket cost is higher for the highest wage earners because they feel they can afford it. If they don't have to use it they don't have to pay for it, that being the cost of the service. In some cases we even see higher paid younger employees taking the maximum deductible coverage they can. This idea is just another income redistribution scheme. This does not sound like a Heritage Foundation idea but some left wing scheme.

    9. Tom Iowa says:

      I think I will just quit my job and live off of the Government teat for the rest of my life…….

    10. Ben Franklin, Kendal says:

      The free market is the most efficient and fastest way to create equilibrium in pricing. Right now, there is no market for health care, much less free. This is a step in the right direction. You don't use your car insurance to pay for a $30 oil change, why do you use your health insurance to pay for a $30 doctor visit? Because you can, and the cost is hidden from you because of your employer based health plan.

    11. Pingback: eHealth Insurance Comparison

    12. Katherine Black, Ell says:

      How about going back to the health care system we grew up with. You went to the doctors when you were sick; and paid out of pocket.

      Your family had hospital health care so it wouldn't break the bank for those that really needed it. Some families went to Private HMOs.

      Otherwise, everyone, even my family with five children, on a single workers electrician's salary went to the doctor when we were really sick; otherwise we treated ourselves with over the counter mediciations.

      If they let us buy antibiotics over the counter; hardly anyone would need to go to the doctor. Today it is all about letting "big brother" take care of us. An entitlement mentality.

      Think of the health care costs of NOT doing health care the way we do it today. If we all pooled our money and only those that needed hospitalization used it; well, we would be in a lot better shape and not mortgage our future.

    13. Rochelle,Colorado says:

      With more responsibility over ones health care,more information would be needed to help evaluate what treatment is needed for what problem. Financially, some of us would need good infomation on evaluating health plans. I'd rather that task than what is before us.

      Ever think of how much of current health care is already paid by the government? Medicare and Medicaid pay a large portion to health care institutions. Competition is needed in health insurance and Providers of care.

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