10/24/2013
Austin FraktAbout Senator Ted Cruz’s health insurance, Ashley Parker, in The New York Times, reports,
“Ted is on my health care plan,” said Mrs. Cruz, who has worked in Goldman’s investment management division for eight years.
Catherine Frazier, a spokeswoman for the senator, confirmed the coverage, which Goldman said was worth at least $20,000 a year. “The senator is on his wife’s plan, which comes at no cost to the taxpayer and reflects a personal decision about what works best for their family,” she said.
This is an employer-sponsored plan. Unless Mrs. Cruz is paying the entire premium and Goldman is not offering coverage through a Section 125 “cafeteria” plan — both highly unlikely — then taxpayers are subsidizing it, as they do all such employer-sponsored health insurance. All health policy wonks know this. I would hope Senator Cruz, who gives long speeches aimed to influence health policy, knows it.
His spokeswoman, apparently, does not. That Catherine Frazier’s statement is almost certainly false is something I’d like to have seen mentioned in the article. The New York Times has done a disservice to its readers in failing this basic fact check.
I wonder if Ms. Frazier, Mrs. Cruz, or the Senator knows just how much taxpayers are subsidizing their coverage. In fact, the Senator and Mrs. Cruz are probably* getting a bigger tax break than the cost of coverage of a typical, non-elderly Medicaid beneficiary, or even two.
If the Senator truly wishes to be free of the health insurance assistance of taxpayers, he might consider instead getting coverage in the individual market. Such plans receive no tax subsidy and, given the level of his family’s income,* he would not qualify for premium assistance under the Affordable Care Act. (And, even if he did, he need not enroll in a plan that qualifies for such subsidies; No plans outside of exchanges will.)
That those in the group market get such a large tax break and those in the individual market do not might strike the Senator as an inefficient economic distortion. If so, he’d be agreeing with most economists. But proposals on what to do about it diverge. Some wish to extend the tax break to the individual market, costing taxpayers a fortune. Others want to repeal it in the group market, recouping hundreds of billions of dollars a year in forgone revenue.
I wonder which approach the Senator would prefer. Given the implications for the debt, I would think the choice would be an easy one. However, I’m not aware he’s on record one way or the other. (Are you?) Is the Senator prepared to endorse a policy consistent with his spokeswoman’s statement to New York Times, that his health insurance comes at no cost to the taxpayer?
* I don’t know the Cruz’s income with certainty. I think it’s safe to assume it puts them in one of the higher marginal tax rate brackets. A Senator’s salary is $174,000. Mrs. Cruz is a managing director at Goldman Sachs.
by RC on October 24th, 2013 at 12:54
From an accounting standpoint, it is a revenue deduction not a cost. The spokesperson’s statement is correct.
by retr2327 on October 24th, 2013 at 13:26
which is why economists, and tax policy experts, view accountants with disdain.
by Egypt Steve on October 24th, 2013 at 13:26
This is what is known as a “tax expenditure”: giving up revenue in order to effect some desired policy outcome. From the perspective of the bottom line, it’s the same as collecting the revenue as tax, and then then returning it (i.e., acknowledging it as a real “expenditure”) to certain tax payers in the form of a subsidy.
by jc on October 24th, 2013 at 13:40
Excuse me, but it is a cost.
The compensation that goes to the “employer’s share” of that health insurance policy would otherwise be taxable income. Because it is spent on health insurance, it is not taxed and so reduces the Senator’s taxable income. That is a subsidy, which comes at some cost to other taxpayers (especially those who aren’t offered health insurance and therefore cannot use pre-tax dollars to purchase it).
Mr. Cruz’ spokeswoman is most certainly not factually correct.
Funny how often people who loudly oppose “government handouts” seem to exempt their own government handouts from the definition of a “government handout.”
by Kyle on October 25th, 2013 at 07:00
Great point! Do you think the senator files the proper paperwork when he finds some loose change on the ground? We should crawl up his butt about that next.
by anirprof on October 24th, 2013 at 13:54
Let’s ask Sen. Cruz’ spokesperson if tax deductions for solar energy, the Earned Income Tax Credit, or in theory, a deduction for abortion services come at ‘no cost to the taxpayer’. How much do you want to bet we get a different answer…..?
by Chris on October 24th, 2013 at 13:25
No from the government’s accounting standpoint it is a tax expenditure program and a cost to the federal government that comes at the expense of being able to lower taxes, increase spending or lower debt. The spokesperson is wrong and so are you. For more information visit the non-partisan Joint Committee on Taxation’s website.
by Danny on October 24th, 2013 at 13:45
Ted Cruz has taken a position consistent with protecting his tax break. He wants to repeal the affordable care act. This appears to be a gold-plated insurance plan that will be taxed in the future under the ACA. Therefore his position of repeal is one that will cost the taxpayers more for his continued coverage.
by Bill S on October 24th, 2013 at 14:03
Another illustration of why most elected officials have a tough time leading by example
by Emily on October 24th, 2013 at 17:14
True fiscal conservatives, libertarians and Tea Party types have supported many different plans to rid society of the unfair tax deduction for employer sponsored plans so I suppose Ted Cruz is very aware of the situation.
by marc sobel on October 24th, 2013 at 17:50
A rough estimate of how much money we are talking about in terms of estimate tax bracket etc. would be useful.
by elboku on October 25th, 2013 at 11:18
Well, according to CNN, the number one tax break is the break for employer paid insurance. http://money.cnn.com/2013/02/05/news/economy/biggest-tax-breaks/
And so says Fox: All employee compensation is subject to tax unless the tax code specifically excludes it. That’s the case for certain employer-provided benefits. The most tax costly company perk is health care. The value of what your employer pays for worker medical insurance premiums, long-term care coverage and health care doesn’t cost you a tax cent.But it does cost Uncle Sam. Through 2014, employer-provided health care benefits will keep the U.S. Treasury from getting its hands on $659 billion. http://www.foxbusiness.com/personal-finance/2011/08/31/eight-tax-breaks-that-cost-uncle-sam-big-money/
by BenefitJack on October 25th, 2013 at 08:03
Tax expenditure? Government handout? Who owns this wealth, this income? Obviously, many here believe governments have first call on any accumulated wealth and earned income – and only after the government’s needs and desires are sated, will they then deign to let individuals keep the remainder.
Elected representatives and the president have long decided how to structure taxes … and have approved each and every one of preferences in IRC 125 and IRC 105/106, as well as the exemptions in IRC 152, FICA and FICA-Med Taxes in IRC 3121, etc. These were all agreed upon (and maintained through countless “reforms” of the tax code) by liberals, conservatives, progressives, and even folks like Sen. Cruz and the other “arsonists”, “terrorists”, etc. who initiated the recent government shutdown.
In effect, assuming the government has some target amount of revenue in mind when it levies taxes, the tax preferences are funded with higher marginal income tax rates. So, something for everyone, right… you let Senator Cruz keep some money through a tax preference on employer-sponsored coverage and that somehow authorizes you (allows you to rationalize) taking more in taxes to fund new government entitlements.