There’s not much in health care that economists agree on. But one of the few things that bring them together is the idea that excluding the value of health insurance from federal taxes is nuts.
“It just doesn’t make sense,” says Jonathan Gruber, an MIT health economist and author of Health Care Reform. “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.”
There are several reasons for that. One is that it’s expensive — it costs the federal government nearly $250 billion a year. Another is that it’s regressive — it benefits people with higher incomes more than those who earn less. And finally, 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.
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