why does no one object to the health insurance "TAX" on employment?

[unblock]

every economics student learns that income taxes drive a wedge between employer and employee, resulting in an inefficient market whereby employers effectively pay a higher than equilibrium price and employees get a lower than equilibrium price. employment lower than it would be absent a tax, and employment that does happen is inefficient due to the loss of money to the taxing authorities.

health insurance as a mandatory (whether de facto or de jure) employment benefit acts similarly on employment. the employer pays more and the employee receives less. true, the employee gets the benefit of the insurance (just as the employee gets the benefit of a paid-for government in the case of an income tax), but the value of this is likely to be considerably less than the money spent on it. economists would ponder what the employer paid full cash instead of salary + health insurance, and most likely the employee would seek a cheaper plan. hence the health insurance premium as a standard part of employment compensation acts as a tax on labor, just as an income tax does, leading to similar inefficiencies.


but what if health insurance were separated from employment? what if it were funded directly from the government, via various combinations of revenue-raising measures. to the extent that these don't simply revert back to taxes on labor, this is like giving a gigantic tax break for employment, and would instantly make hiring americans much cheaper than it is at the moment. health insurance would naturally be job-independent, meaning you have it even when you lose your job and can't afford cobra. i wouldn't mind them taxing corporations more, especially bailout-eligible "too big to fail" corporations, or returning to a more equitable tax rate on non-labor income. does it make sense that labor is taxed dramatically higher than capital gains?

[Captain Hilts]

1. Beats me. It places the burden unfairly on NE and 'Blue' states in which a higher % are

insured than in the South.

I've been accused - by Bloo in Bloo - as being an 'I got mine' type on this. But I am among the uninsured.

Blue states are already subsidizing Red states and this tax would make that balance tilt even further.

[RaleighNCDUer]

6. Huh? The OP is describing the system we already have, which

created that imbalance.

If the insurance coverage was provided by the government (i.e., single-payer) instead of the employer, it would eliminate the system where the employers hire people p/t to avoid being responsible for their health insurance, it would allow the employers to pay their employees a living wage, and get us OFF this damned employer/insurance company system.

The ONLY reason we have this 'system' in the first place was because wage controls during WW2 prevented employers from giving raises - so to lure employees they began offering to pay some portion of health insurance. The insurance companies saw how it quickly got millions more paying insurance that had been previously and after the war fought tooth and nail to KEEP employer-based insurance as the standard, at the same time fighting against any single-payer universal coverage that most post-war societies were adopting.

[phantom power]

2. For the same reason...

that nobody objects to having private industry bureaucrats between them and their health care, but for some reason are frightened to death by the possibility public servant bureaucrats, who would not be motivated to screw their customers for profit, and would be at least indirectly subject to the approval of American citizens.

[unblock]

4. exactly. people have been brainwashed into thinking that the only instutition is the government

all the problems of government that right-wingers rail on are derived from bureaucracy, entrenched interests, corruption, callous disregard for customers, etc., and yet these are problems of ALL large institutions, not just of the government. in fact, corporations screw people over more often and in more ways than the government.

what difference does it make if you are being screwed by the public or by the private sector?

[unpossibles]

8. I tried explaining that to a winger last night

who was blathering on about how the government always screws up everything, etc.

I pointed out that private companies are often just as inefficient and sometimes more so, and that they can suffer from the same bureaucracy, except that they also have a profit motive to screw you over.

Also, I fail to get why, if they are so afraid of the government, they keep electing incompetent idiots who can't seem to do anything right, private or public sector. It's like picking a heart surgeon who hates performing operations.

[DefenseLawyer]

3. Insurance companies are making billions

They have a more organized and better funded lobby than "employers" as a whole and they have wisely tied the personal fortunes of many our Senators to their own success. Just look at how many husband and wives of politicians sit on insurance company boards. Rocket science, it is not.

[TahitiNut]

5. Under the current 'system,' untaxed health insurance benefits means others are subsidizing ...

... the 'golden handcuffs' of employers who can deduct the cost of such a benefit along with all other costs of employment. Those taxpayers subsidizing that tax-free benefit are often themselves paying for health insurance in after-tax dollars or are doing without health insurance.

The real abomination is that EARNED income is taxed at higher rates than taxes on UNEARNED income (e.g. capital gains, inheritance) ... and this is a systemic predation on labor and the working class. This has helped create a further demarcation of class, where the 'management class' is compensated with tax-preferred items (e.g. ISOs, health insurance) and the working poor are under-compensated and solely with taxable forms of remuneration. The 'system' has become increasingly regressive and punishes labor.

Like any 'system' in which the "win-lose" model of decision-making prevails, almost everyone loses. Employers are participating in the creation of conditions that make them less and less competitive.

[RaleighNCDUer]

7. Employers are participating in the creation of conditions that make them less and less competitive.

Ain't it the truth!

And THAT is what we need to be pushing - make the employers fully cognizant that it benefits THEM as much, if not more, than the employees to have a single-payer system.

[TahitiNut]

10. Obama has stated this repeatedly ... only to have it fall on deaf ears.

The FACT of the matter is that multinational corporations can shift labor-intensive activities off shore. It's small business that suffers. It's no accident that cheap labor predators have increased proportionate to the cost of health care.

[Captain Hilts]

11. Yes 'earned' income is taxed at a higher rate than unearned income. That's a crime. But Congress

isn't worried about that killing the motivation to work....

[zipplewrath]

9. A moving target

The implication so far has been that the tax would be on the higher income brackets. Those brackets often have the most lucrative health benefit packages as well. My healthcare costs are all "before tax" right now. That is a larger benefit for me than people lower on the economic scale that pay many higher costs and out of pocket to boot. My health care benefit is also more generous than many lower paid folks. The concept here is to tax those benefitting more than others.

Of course there have been few specific proposals so far. These taxes on "the rich" can start to slide down the scale and end up skewing the tax burden once again.