Health insurance and taxes

February 29, 2008

I'm speaking today at a conference held by the Tax Policy Center and the American Tax Policy Institute on "Taxes and Health Insurance: Analysis and Policy." The slides for my talk and the audio from the sessionare posted here. They summarize CBO's analysis (based in part on revenue estimates from the Joint Committee on Taxation) of the Administration's 2007 proposal to alter the tax incentives associated with health insurance. Our estimate of the budget impact of the Administration's 2008 proposal (which is slightly different from the 2007 proposal) will be included in the summary of CBO's analysis of the President's budget that we will release on Monday morning; we will issue a more detailed report on March 19.

One point that has received little attention but that I will emphasize at the conference -- and that is also noted in a paper by Jeff Liebman and Richard Zeckhauser that is being presented there -- is that most workers seem to have little knowledge of how much after-tax wages they are forgoing in exchange for their employer-provided health insurance. (Liebman and Zeckhauser relate a story about how difficult it was, even for a motivated professor with a PhD in economics, for one of them to obtain that information from their employer, Harvard University.) One result of this is less pressure for efficiency in the health sector. Indeed, given the apparent size of inefficiencies in health care, it may turn out that one of the biggest distortions from the tax code occurs through this channel.