Part of the “My Prescription” series
Yes, I’m bored already as well, and I apologize in advance. I especially feel bad as I just read “What White People Like,” and it is much more entertaining than tax reform (and it described me well. I have several New Balance sneakers). But in order for “My Prescription” series to move forward I must talk tax reform. Here goes.
Let’s first lay out the current situation. If you receive insurance through your employer both you and your employer will not pay any taxes on the money put toward the insurance (totaling $208.6 billion). Cool!
But if you buy insurance on your own you pay for that insurance with post-taxed money. Not so cool and I would add that it seems unfair, doesn’t it?
Let’s do the numbers:
The average subsidy totals $2,778 per employer sponsored employee.
In firms where half of the employees earn less than 10.43/hour (low income) the subsidy is $2,268 per employee.
In firms where more than half make more than $23.07/hour (high income) the subsidy is $3,283 per employee, that’s 45% higher.
A different analysis in 2004 puts the subsidy for families earning over $100,000 received a tax subsidy of $2,780 where families earning between $40,000 and $50,000 received a subsidy of $1,448. And for those earning less than $10,000 the subsidy totals $102.
So the more you make the greater the handout for health insurance. And we wonder why the poor have a hard time getting insurance. Not only do they have to buy the same insurance with less income, but they get less help (if any at all) than the rich do. That’s some good policy!
So I suggest getting rid of the tax deductible insurance policy and change that in for refundable, advanceable, and assignable tax credits based on income. So the people who need more help getting insurance will get it and those that don’t need the help will get a bit less. Now I still want to encourage employers to kick in for insurance. It seems silly to lose their help by removing their carrot, so I would still offer a tax break to employers to kick in funds, but the employees’ contribution would come from the tax credit based on income (and employer contribution), not pre-tax dollars.
This adjustment will provide a more equitable tax policy. Add that to the tax exchanges and removing the employer from sponsorship of health insurance you now have a foundation that we can build upon. Next time we will build.