Wednesday, March 16, 2011

When Will The Actual Budget Debate Start?

Matt Yglesias noting that the focus on keeping the government running week to week is preventing a debate about next years budget, the medium term budget (next 5 years), and the long term budget. Further, domestic discretionary spending is a trivial part of our budget problem, and health care costs are the main source. Nearly two months after the House passed the repeal of the Affordable Care Act (ACA), there is no coherent 'replace' plan.

Limiting the tax preference of employer paid insurance starting in say 2012 is a simple, consequential and flexible policy that will work to slow health care costs regardless of the future direction of health reform. Doing so would improve the saving potential of the ACA and will work as intended under any imaginable health reform Republicans might someday pass. Anyone claiming to be interested in the deficit who is not advancing policies to address health care costs is only talking.

Update: Steve Pizer at Incidental Economist with fourth in a series on the tax on high cost health insurance that will begin in 2018 under the ACA. Democrats have already voted for limiting the tax preference of employer paid insurance via this provision, and most Republican plans talk about ending it all together. So, bring this tax, or a more direct limiting of the amount excluded from taxes in a tax reform context into 2012. It will actually work to slow health care costs!

Further, if I interepret Pizer's figure correctly, a shift from a tax on high cost insurance to a similar capping of the tax exclusion of employer paid insurance premiums should lessen the crowd out (from private to subsidized insurance, Medicaid) effect on low income workers who would be less likely to have their tax liability increased due to a capping of the exclusion. So capping the tax exclusion is more progressive than the tax on high cost insurance (I think). There is some cap of the tax exclusion that can raise the same amount as the tax on high cost insurance, but which might do so with less crowd out (I think). I need to noodle on that a bit.

3 comments:

  1. Don
    I am not following above...but want to, I am interested in the point you are attempting to make.

    Perhaps part of the problem I am having is understanding Steve's post. Maybe it is the visual or methodology used to collect data, but not taking it all in.
    Brad

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  2. Brad
    I will work on a post that walks through the logic in a non cryptic way...that also helps me convince myself I am correct!

    Don

    ReplyDelete
  3. Brad
    still working on it...trying to get the math straight to see if it matches the intuition...tomorrow.
    Don

    ReplyDelete