Monday, December 28, 2009

J. Gruber joins the dark side

People, did you know that any money you actually get to keep is simply a temporary tax break generously allowed to you by a beneficent and magnanimous government?

Me neither.

But according to Gruber, the so called "Cadillac tax" on generous health plans, is not a tax at all, but rather just a partial mitigation of an existing tax break:

"The assessment proposed in the Senate is not a new tax; it is the elimination of an existing tax break..."

Now, I don't deny that what Gruber is saying is true in a weird world where we start with everything belonging  to the government, but have we really come to that? Maybe so.

By the way, not only is it not a tax, it's also magic:

"So in the end, we have a policy that provides the necessary financing to pay for subsidies to low-income families; induces employers to buy more cost-effective health insurance, lowering U.S. health-care spending; offsets a bias in our tax system that favors more expensive insurance; and raises wages by $223 billion over 10 years."

No word yet on whether or not it will cure male pattern baldness, but I am hopeful!


Chip S. said...

By the time this tax/ex-subsidy is set to take effect there won't be any "Cadillac" health-insurance plans left to tax. So let's call it the "Duesenberg tax" instead.

MaxSpeak said...

The implied counter-factual of this post is a world with no taxes at all. I can admire your optimism but less your realism.

Compared to the counter-factual of a perfect income tax, the exclusion for health insurance is indeed a tax break. So say the weird army of tax economists, with very few exceptions. The not-weird ones, evidently.

Anonymous said...

wow, it's amazing what libertarians will say when they have no clue what they are talking about. Right now most income is taxed but not income in the form of insurance. This creates a distortion, making firms substitute towards providing extra insurance. This tax distortion is one of the reasons that the health insurance system is so screwed up in the US. It makes zero sense for insurance to be linked with employment. Given that there will be an income tax, it should be applied to all form of income.