Sounds Right to Me
By Arnold Kling
What they’re saying is that, yes, expensive health plans would be taxed more [under the recent Bush health proposal]. But people would respond to the new policy by scaling back their health plans. Thus they’d avoid the tax.
…Snow and Baicker are right to say that if the proposal becomes law, compensation packages will adjust, with expensive plans being scaled back and the savings passed on in higher wages. But those higher wages will be taxed. No matter how the compensation package is rearranged, the percentage of compensation that is taxed will go up for these people.
Ponnuru is correct, as far as I can see. I wonder what Ms. Baicker will say here. Personally, I would make 100 percent of employer-paid health care benefits subject to tax, and then cut tax rates. That is known as tax reform.