Answering Matt Taibbi

I’ve really enjoyed Matt Taibbi’s work on Goldman Sachs, and here he looks at the intersection of Goldman and health care through the employer tax exclusion, which according to CBPP is the equivalent of “the federal government pays $14,777 to provide health insurance for each of Goldman Sachs’s managing directors and pays nothing to provide health insurance for this middle-income family.” The report is an illustrative example of why we should tax employer health benefits. I’m not sure what Taibbi is referring to when he says he’s seen that taxing employer benefits that it’s a “bad idea,” but he finishes by asking this question:

But would this also end up taxing companies whose employees have high premiums just because they’re sick? Looking for input here…

The answer, of course, is yes. But the important part is that the revenues would be used to pay for subsidies for the poor and to help pay for Medicaid and Medicare. In other words, the money would be directed to help the poor and the sick. It’s true that it wouldn’t be great for union members who negotiated for comprehensive health plans (a small, but powerful minority), but there’s little doubt taxing health care benefits (coupled with substanitive reform), would be on whole, a progressive change for the better. You can’t look at tax raises in isolation — you have to also consider what they’ll pay for.

Anyway, to make a broader point, the employer based health care system really doesn’t make much sense. It’s inefficient, it traps people in jobs, it reduces entrepreneurship, it results in loss of coverage due to factors outside of their control, and it hides costs from consumers. Simply put, it’s horrible policy, and any measure that makes its continued existence less likely is a good thing.

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