Most Economists Agree Healthcare Should Be Taxable Income


Julie Rovner’s article regarding taxes on healthcare, completely misses the mark.  In the article, Rovner states there’s one topic on healthcare on which most economists agree; healthcare should be taxable income.  To support her claim, she quotes MIT economist and author of Health Care Reform, Jonathan Gruber who says excluding the value of health insurance from federal taxes, “just doesn’t make sense”. Gruber continues, “And it’s important to emphasize in this world where economists seem to agree about nothing, this is something where there’s just broad and universal agreement.”  According to Rovner there are several reasons for taking this stand.  First, it costs the government nearly $250 billion dollars a year.  Second, it’s regressive – it benefits those with higher incomes more than people with lower incomes.  Third, the tax benefit encourages people to take their compensation in health insurance rather than wages. That, in turn, encourages them to use more and more health care.  Let’s analyze these three points.  It does indeed cost the government $250 billion dollars a year but that’s because health costs continue to rise at such an alarming rate.  Obamacare is supposed to put an end to runaway costs.  Besides, if the government didn’t spend money on healthcare, it would simply squander it somewhere else.  At least we can see the benefits of healthcare spending.  Second, the tax benefit does not in fact benefit those with higher incomes.  With or without the tax benefit, wealthy people will be able to afford insurance.  On the other hand, people with lower incomes might have difficulty affording health insurance, if the tax benefit was removed.  So if Rover’s argument was to cut the tax break for higher incomes and leave those with lower incomes alone, that would make sense.  Finally, the idea that people will take their compensation in health insurance over wages, so they can overuse their health benefits is totally arbitrary and unproven.  Rovner and any economist, would have a difficult time substantiating the claim that families would rather go to doctors than visit Disney World.  It’s silly actually.  What’s most interesting about this topic, is it’s one of the few areas where the wealthy, middle class and unions all agree.  Don’t mess with tax-free healthcare.  It would be like taxing milk or bread.  Healthcare is necessary, already costs far too much and people shouldn’t be penalized for having it.  It certainly shouldn’t be a class issue.  Why doesn’t the government stop allowing tax deductions on the interest on mortgages?  Canadians don’t enjoy that benefit.  Wealthier people also get larger deductions because they own more expensive homes and therefore pay more interest.  The point is, there are many ways to increase revenues and reduce deductions but tax-free healthcare, should be left alone.

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