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Thursday, January 17, 2013

Mulligan: Tax Expenditure Estimates Understate True Revenue Loss From Health Insurance Exclusion

New York Times:  Tax Exclusions for Health Insurance, by Casey B. Mulligan (University of Chicago, Department of Economics):

A typical approach to estimating the size of the health subsidy implicit in the tax exclusions is to estimate the amount of federal personal income tax revenue that is lost because of the income that escapes tax. ... However, the income-tax approach underestimates the amount of the exclusion, because health services are often excluded from many other taxes. ...

More study is needed to quantify accurately the government’s effect on the health market. But we can be sure that public policy has served to enlarge the health industry at the expense of others and that previous estimates do not fully appreciate the magnitude of the distortion.

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Comments

Government finance is so odd. If my father-in-law fails to hire me because I won't discount, where does that expenditure go on my P&L?

Posted by: Yo Gabba Gabba | Jan 17, 2013 2:14:02 PM