On Tuesday, in Florida, Mitt Romney said,
Well right now, most people get their insurance through their employer and the reason they do that is because their employer gets a tax deduction when they buy insurance for you. But if you’re a very small-business person—let’s say a one-person business—you don’t get a tax deduction for buying insurance. And if you’re an individual that’s not employed, you don’t get a tax deduction for buying your own insurance.
Right. And, so, most economists and many policy wonks, as well as deficit hawks, advocate eliminating or phasing out the tax deductibility of employer-sponsored health insurance. Doing so would increase tax revenue by about $250 billion per year (pdf). It would also discourage overly generous health care benefits. Seems like a good idea to dump this tax subsidy. But, it looks like Romney is leaning the other way, because his next sentence was:
What I would do is level the playing field and say individuals can buy insurance on the same tax advantage basis that businesses can buy insurance. [Emphasis added.]
Can anyone tell me why Romney wants to expand the tax preferred status of health insurance? Doesn’t he believe we overspend on health care? Doesn’t he believe in the incentive effects of taxation? Isn’t he interested in reducing the deficit and/or cutting marginal tax rates? Why, then, would he want to create an even bigger tax expenditure? If Romney means something else (e.g., removing the tax deduction and offering tax a tax credit for group- and non-group health insurance products alike), then I’d like to know where he said or printed that, because his website doesn’t say it. Frankly, I’m puzzled.
[Cross-posted at The Incidental Economist]