TakeAway: Seems obvious to me that health insurance premiums paid by employers should be counted as W-2 income, with income tax deductiblility (or credits) of, say, $5,000 per person with a max of $15,000 per family. Helps out the folks who don’t have access to company paid premiums and stops the gold-plated programs from bloating healthcare spending.
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From DC Examiner: Democrats Win Lobbyists but Lose Basic Reforms, October 1, 2009
The Democrats are having trouble passing convoluted and plainly imperfect health care bills. Maybe they would be better off going back to basics.
All of the current healthcare proposals build a makeshift addition to the health insurance system that grew out of a tax law decision made during World War II.
That decision was to give a preference to employer-provided health insurance: The cost of insurance would be deductible for employers and would not be counted as income for employees.
The system insulates health care consumers from costs, with the result that insurance costs have recently crowded out wage increases.
The tax preference is steeply regressive. High-earning employees with gold-plated, employer-provided health insurance get deductions that are worth many thousands of dollars.
Those without employer-provided health insurance, or low-earners who are among the 40 percent of earners who do not pay income tax, get exactly zero. If a Republican Congress had designed such a system, it would be attacked as a favor to the rich, and rightly so.
During the 2008 campaign, Barack Obama attacked John McCain’s proposal for equalizing the tax treatment of employer-provided and non-employer-provided health insurance, and so it would be embarrassing for him to advocate such a change.
More determining, labor unions, a strong Democratic constituency, want to maintain the current system because they have obtained very expensive policies for their members. But with only 8 percent of private-sector workers in unions, it seems clear that basic reforms would do more for low-earners and ordinary Americans than the Democrats’ current plans.
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