The Bottom Line: Taxing Health Care Decisions
Information about the Senate health care bill is trickling in -- word is that coverage provisions will cost $849 billion over ten years and the bill will reduce the deficit by $127 billion. The Joint Committee on taxation has also released its analysis of the bill's $370 billion in taxes.
Compared to the Senate Finance bill, this bill would reduce the tax on high-cost insurance plans so it raises around $150 billion instead of $200 billion, and make up the difference with an increase in the Medicare payroll tax for high earners. At least from a fiscal perspective, this is a big mistake.
We've discussed, before, all of the advantages of an excise tax on high cost plans. For one, since the tax is on health insurance, it grows as fast or faster than health care costs, and therefore makes it a sustainable revenue source.
See for example the growth rates of revenue from the excise tax when compared to the payroll tax increase.
Between 2015 and 2019, revenue from the excise tax is expected to double. Revenue from the payroll tax increase is expected to grow only 30%...
