Taxing Health Benefits, and British Parliament Benefits

Today's Wall Street Journal had good editorial on taxing health care, pointing out that the President and Congress are struggling to figure out how to raise enough taxes to pay for President Obama's health-care take-over.  The most likely target is the exclusion of employer-based benefits from taxation, which moves Democrats closer to John McCain's position in last year's election.  However, the goal of McCain's reform was to give health-care dollars to American families instead of their employers.  Obama's goal is to seize health-care dollars for the government. 

The WSJ also ran an op-ed on "Parliament and the Laffer Curve" explaining that the exclusion of "expenses" – very broadly defined – from British legislators' taxable compensation has led to taxpayers paying for cleaning moats and repairing duck ponds in politicians' country estates.  The op-ed diagnosed the erupting scandal in terms equally applicable to American health care: "Members of Parliament face a 100% tax rate on their unclaimed allowances."

The current tax treatment of employer-provided health insurance causes Americans to over-insure. And (unless they have a Health Savings Account) the type of insurance they have is use-it-or-lose-it. Failure to consume health services of even marginal value means forgoing those benefits forever.

Comments (1)

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  1. Stephen C. says:

    Good distinction. McCain/Coburn seek to redirect tax subsidies to people in order to empower them.
    The Obama/Congressional Democrat approach is to redirect tax subsidies to governmentand and let government dictate the terms on which you get a subsidy. This second approach empowers the bureaucrats.