• I bet you’re getting a subsidy for your health insurance, too.

    One of the most frustrating arguments against expansions of health insurance is when someone finally states that “we shouldn’t be responsible for other people’s health care.” Often, I hear this one wheeled out when discussing subsidies on the exchanges under the PPACA. Many question why we, as taxpayers, should be forced to pay subsidies to people making up to 400% of the poverty line so that they can get health insurance.

    What makes this argument frustrating is that almost everyone making it is getting a subsidy, too.

    You likely know it, but when you get your insurance through your job, that money is not taxed. When the government decides not to tax something, they are giving up revenue. That hurts the balance sheet. Every time the government passes a new deduction or credit, it’s a tax expenditure.

    This means that when you get your insurance through your job, it’s being subsidized by the federal government. Taxpayers are paying for part of it, the part the government doesn’t take in.

    How much is this subsidy to you? The tax policy center said it was $131 billion in 2008. That’s a lot of money. The Joint Committee on Taxation calculates that the subsidy will be almost $660 billion from 2010-2014. For the record, that is WAY more than the cost of the PPACA.

    Now, if you all want to give up that tax expenditure, so be it.  We’d be much closer to solving the deficit problem, and the country as a whole might be more inclined to push for more comprehensive cost controls. But until then, it behooves everyone with employer sponsored health insurance to stop complaining about anyone else getting a subsidy.

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    • Good point. Thanks.
      If they can close the tax loophole for hedge fund managers, I’ll give up my health expense tax deduction.

    • While the Government has the right to impose taxes on its citizens, the fact that they chose not to tax certain aspects of a citizen’s income does not equal subsidizing those incomes. Not everything is taxed. Are our grocery bills subsidized because the government does not collect sales tax on food? I think that perspective is backwards. The government penalizes people via taxation so that they can subsize a variety of areas. Lack of taxation should not be viewed as a subsidy, but rather taxation should be viewed as a penalty.

      • Compensation is compensation. If you don’t tax this compensation, it is subsidizing this aspect. I’m sorry if your head hurts from thinking about it, but any compensation that isn’t taxed is a subsidy.

        • I agree with Lynn on this point, though it’s semantic. Aaron says “When the government decides not to tax something, they are giving up revenue. That hurts the balance sheet. Every time the government passes a new deduction or credit, it’s a tax expenditure.” Deciding not to tax something is not the same as a deduction/credit/tax expenditure. Physical characteristics like height are not taxed, but I wouldn’t say they’re subsidized. Same with food or services. Would you still consider it a subsidy if two things are taxed at different rates?

          If the government decides to tax one form of compensation at one rate, and another form at a lower rate (even zero), that doesn’t make it a subsidy.

    • I told this fact to someone at my job…his head exploded. It just wasn’t true that his health care was subsidized. Some stupid people in this world.

    • Or, we could see what we could have purchased on the open market with the additional taxable salary we would have received if it hadn’t been kept from us by our employer to buy the insurance. The whole industry probably would have been healthier, as well as the employees.

    • If you don’t pay sales tax on some item, that doesn’t mean that the government is subsidizing your purchase. You paid the entire amount that the item was worth; you merely didn’t pay a government surcharge on top of the price of the item. Same with healthcare. Those who privately buy health insurance are paying the full price of that insurance. The fact that the government doesn’t take MORE money from them doesn’t mean that the government is subsidizing it.

      This whole idea of “tax expenditures” is playing with words; it assumes that the money is the government’s to begin with, and that they GIVE this money to the taxpayer as an “expenditure.” The money DOESN’T belong to the government in the beginning; it belongs to the taxpayer in the beginning.

      • @Bob E
        If you want a balanced budget the ins have to match the outs. Whether you consider tax expenditures reductions of the ins, or different types of outs, they benefit some taxpayers at the expense of others, and make the deficit larger. The language of who the money belongs to is semantics. I can live with and respect arguments that we spend too much, just say what we should cut, and lets have tax receipts near expenditures.

    • wow, been getting all the updates on comments and all i have to say is…a statement like this “This whole idea of “tax expenditures” is playing with words; it assumes that the money is the government’s to begin with, and that they GIVE this money to the taxpayer as an “expenditure.” The money DOESN’T belong to the government in the beginning; it belongs to the taxpayer in the beginning.” should be taken as a clear signal that you are not discussing this with someone who’s mind will change on the topic.

      when the government’s tax code gives someone special treatment, that’s called a tax expenditure. you can call it whatever you like…but it doesn’t change the fact someone got special treatment.

      Married people get special treatment. Corporations get special treatment, People with children get special treatment. A clean tax code would have no credits and no deductions at all, for anyone. But we don’t have that. anyways whatever you call it, in the end it is about are we all treated equally? the answer is no. when someone else gets a break i don’t…that money comes from somewhere…you figure out where….maybe magic. that’s why it is a expenditure.

      • Would you consider the lower tax rate on the poor a tax expenditure?

        • I would consider anything and everything outside of the actual Tax Rates a tax expenditure.

          The lower tax rate is not the same as saying I’m going to collect 15% from you but after deductions and credits you pay 7%.

          The lower tax rate is just that, a lower tax rate.

          The deductions and credits that bring you down to 7% are the expenditure.

          We didn’t always have the convoluted mess of a tax code we have.

          In my ideal world we would just have the tax rates, no deductions/credits or anything. I would keep the progressive tax in place and perhaps add more brackets.

          People making under 50k should pay the same rate people making 100k pay….we have some of that already in out current system before deductions and credits. to a lesser extent after deductions and credits.

          Most people don’t know what their effective tax rate was last year.

        • #Jeremy N
          we have a progressive income tax structure. Everyone has the same rate for the first $0-$8,500 (10%); $8501-$3,500 (15%) and so on. Bill Gates pays the same rate on his first $8,500, exact same as someone whose total income is $8,500…here are the rates http://www.bargaineering.com/articles/federal-income-irs-tax-brackets.html

          • we have the rates and then we make the rates almost useless via tax credits, deductions…aka expenditures.

    • correction
      “People making under 50k shouldN’T pay the same rate people making 100k pay”