Dear Prez: Taxing Benefits is Bad Health Policy

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I realize writing a letter to the president is like writing to Santa Claus.  Yes, Jim, there really is a Santa Claus; but the elves read the letters.

Short letter.

Dear President Obama:

Taxing benefits is a bad idea!

It is bad politics

It is not just that you thought it was a bad idea during the campaign and now you have flip flopped.  You are allowed to flip flop on some issues.

Far more important, you told us that 95% of Americans would not see a tax increase.  And now you want to tax our benefits.  Did you misspeak?  Were you just plain wrong?  Or misguided?

I realize not everyone has employer provided health care benefits, so it is a little bit like taxing the rich.  Is that how you see it?  Is that how people in Montana see it?  I don’t think those of us with employer provided benefits would think of ourselves as rich.  Lucky perhaps, but not rich!

It’s not that this goes against my interest.  It goes against your interest.  I do not believe that you have an interest in betraying the American people on the issue of taxes.  Aren’t working people upset enough already? I suggest you wave your veto wand and make this curse go away.

It is bad economics

Someone has to pay and you know it is not the employers.  How will depressing worker wages help the economy?

It is bad health policy

I have made the point here frequently that the current system distorts domestic and international competitiveness.  Taxing benefits will aggravate the problem.  It will make benefits and compensation more expensive forcing some employers to abandon or cut back on employer provided health benefits.

So your idea to pay for those without health insurance is to cause more people to be without health insurance.  So you fix that problem by raising the tax on those with insurance causing more employers to give up health insurance.

I imagine a man in a boat who sees water come in at one end and decides the solution is to drill a hole at the other end for the water to leave.

Bad idea!  Unless…but that is a topic for the next post on Wednesday.