Monday, January 10, 2005

An idea for President Bush's tax reform panel

If President Bush's tax reform commission is looking for good ideas, here is a bit of light reading that they could start with:
Tax Policy for Health Insurance
BY: JONATHAN GRUBER
Massachusetts Institute of Technology (MIT)
Department of Economics
National Bureau of Economic Research (NBER)
(Full text is $5 for non-NBER subscribers)
ABSTRACT:
"Despite a $140 billion existing tax break for employer-provided health insurance, tax policy remains the tool of choice for many policy-makers in addressing the problem of the uninsured. In this paper, .... I find that every tax policy is much less efficient than public insurance expansions: while public insurance costs the government only between $1.17 and $1.33 per dollar of insurance value provided, tax policies cost the government between $2.36 and $12.98 per dollar of insurance value provided. I also find that targeting is crucial for efficient tax policy; policies tightly targeted to the lowest income earners have a much higher efficiency than those available higher in the income distribution."

If anything ought to be on the tax reform agenda, this is it. As a rough back of the envelope calculation, the infinite horizon revenue estimate for repealing what is now a $140 billion annual tax break, growing at the same rate as the economy (although presumably it is actually growing even faster) might be about $7 trillion. In other words, about 70 percent of the infinite horizon Social Security gap.
The fiscal benefits are much larger than this, however. Glenn Hubbard, John Cogan, and Daniel Kessler, in Brilliant Deduction, recently argued that people with catastrophic health insurance coverage should be allowed to deduct all of their medical expenses. They estimate that, even though this would expand total tax breaks for healthcare, it would actually reduce people's healthcare expenditures by 6% annually by eliminating the current tax incentive to over-insure routine expenditures and thus engage in wasteful consumer spending. Taxing employer-provided health insurance would address this as well, while also eliminating the tax preference that Hubbard et al would retain in favor of one form of consumer spending (healthcare) over others. So we get a better proposal than that of Hubbard et al (who I would guess were moved by concerns about political feasibility), while raising rather than losing revenue.
Since we want people to have catastrophic health insurance coverage, both paternalistically for their own good and because we might end up paying for their critical care otherwise, we might want to continue offering tax benefits for that, at least with targeting (such as to low-income workers) as Gruber recommends. This would admittedly cut the direct revenue gain a bit, but probably not much. And keep in mind that reining in lack of cost-consciousness in the healthcare sector, which partly results from tax-induced over-insurance, might also yield indirect fiscal benefits to the government via Medicare and Medicaid, since expenditures in those two programs are presumably influenced by healthcare industry norms.
A whole lot more worth spending "political capital" on than Social Security privatization, wouldn't you say?

23 comments:

Anonymous said...

I saw something similar about computer shopping

Anonymous said...

High? just a note to say I saw your blog and found it interesting. So if you have the time check mine out and say High?. Also would like to exchange some links.
Thanks

Anonymous said...

Lose Weight Now. Fasting, when done peoperly, can be a basoc part of a solid weight loss plan. If done correctly it can ne a great start to your new way of life.
Link to this site. weight loss using hypnosis

Anonymous said...

I honestly must say this is the best blog I have ever come across. I am not just saying that to kiss your butt! I am studying for my master degrees and spent the last 12 hours (and 12 cups of java) researching this area topic. Many blogs have generic information but yours is different. I can actually apply some of this information to my studies. No worries I will give you full credit in my references section. I took it upon myself to add you to my favorites and will visit back to let you know how my grade ends up. Thanks so much from!hartford home owner insurance.

Anonymous said...

Good blog you have here, cool. I was searching blogs and stumbled on yours, good ideas.

regards,
apply health insurance online

Anonymous said...

Searching around the blogs and found this one interesting, keep blogging mate!

health insurance company directory

Anonymous said...

Very informative blog. I found everything I needed here. Great content! neuromuscular massage therapy

Anonymous said...

Great bit of blogging on your site! If you get a chance look at my site Hypnosis Articles

Anonymous said...

Hi there Blogger, a real useful blog.Keep with the good work.
If you have a moment, please visit my automobile insurance adjuster site.
I send you warm regards and wishes of continued success.

Anonymous said...

I am here because of search results for blogs with a related topic to mine.
Please,accept my congratulations for your excellent work!
I have a automobile insurance online quotes site.
Come and check it out if you get time :-)
Best regards!

Anonymous said...

A fantastic blog yours. Keep it up.
If you have a moment, please visit my automobile insurance online quote site.
I send you warm regards and wish you continued success.

Anonymous said...

A fantastic blog yours. Keep it up.
If you have a moment, please visit my automobile insurance rate averages site.
I send you warm regards and wish you continued success.

Anonymous said...

Hey Fellow, you have a top-notch blog here!
If you have a moment, please have a look at my make money with site.
Good luck!

Anonymous said...

Hello Friend! I just came across your blog and wanted to
drop you a note telling you how impressed I was with
the information you have posted here.
Keep up the great work, you are providing a great resource on the Internet here!
If you have a moment, please make a visit to my bike insurance companies site.
Good luck in your endeavors!

Anonymous said...

Hi Friend! You have a great blog over here!
Please accept my compliments and wishes for your happiness and success!
If you have a moment, please take a look at my business insurance quotes site.
Have a great day!

Anonymous said...

Your blog I found to be very interesting!
I just came across your blog and wanted to
drop you a note telling you how impressed I was with
the information you have posted here.
I have a bad credit houston mortgage texas
site.
Come and check it out if you get time :-)
Best regards!

Anonymous said...

This is an excellent blog. Keep it going.You are providing
a great resource on the Internet here!
If you have a moment, please take a look at my calculator home insurance mortgage site.
Have a great week!

Anonymous said...

I am here because of search results for blogs with a related topic to mine.
Please,accept my congratulations for your excellent work!
I have a bad credit lee mortgage refinance site.
Come and check it out if you get time :-)
Best regards!

Anonymous said...

Hey Fellow, you have a top-notch blog here!
If you have a moment, please have a look at my california cargo insurance quotes site.
Good luck!

Anonymous said...

I was searching blogs,and I found yours.Please,
accept my congratulations for your excellent work!
If you have a moment, please visit my bad credit mortgage lender site.
Have a good day!

Anonymous said...

Get yours FREE Today!

Anonymous said...

Great blog very informative re canadian pet insurance. In a simliar vain to canadian pet insurance would definitely recommend http://www.bargainplace.co.uk for **cheap car insurance** or **cheap home insurance**, even **cheap pet insurance**

Anonymous said...

Really great blog I've bookmarked it - now some really important bits of financial advice - as it is along the same lines I thought I would share this info with you.

We were paying far too much for items like kids clothes, games consoles, car insurance/home insurance/pet insurance, broadband, mobile phones and utilities/loans, legal advice about credit card debt etc. Then a friend of mine recommended a site called www.bargainplace.co.uk. We were able to get cheaper electricity, gas, mobile phone, broadband and loan deals at bargainplace. Thanks to my friend (and the site) I am saving something like £100 a month and can afford an extra holiday a year. Booked of course on www.bargainplace.co.uk. Thanks bargainplace ;-) !!

PS - I set up a website a couple of months ago and until recently I was getting no traffic at all. Then, I signed up to Linkreferral.com. Not only did I start getting visitors by the truck load, I also joined Affiliatewindow and am now making lots of money by partnering with companies like Argos, Next, John Lewis, Pixmania, Marks and Spencer, LX Direct, Littlewoods, Vodafone, phones4u, phones2u, Sky, NTL, Virgin Media, Talktalk, Woolworths, Empire Direct, ebay plus online gambling sites - you can make pot loads of cash.

Linkreferral.com is absolutelely free and has really helped my business take off.

PLUS!! there are opportunities to make money from Linkreferral as well - sign up for free and check out the website and email received for details

Follow these free tips and you won't go far wrong - that brand new BMW or Mercedes might just be around the corner!!