Redistributive public policy is even more of a theme in the group health insurance market, which is nine times larger than the individual market and the dominant source of “private” health coverage. The government massively subsidizes this market by excluding employer-provided health benefits from income and payroll taxes. Federal tax advantages for health insurance add up to $300 billion a year.
These tax subsidies are highly coercive. Take a family with salary income of $60,000 and a health plan worth $15,000. If this family instead took all of its income as $75,000 in cash salary, it would face an income and payroll tax hit of around $4,500, or about 6% of its income. For comparison, the individual mandate penalty in Obamacare will be limited to 2.5% of income.
–Josh Barro, Business Insider
@afrakt (via phone)