Linking the Components of Health Care “Reform”
According to M.I.T. economist Jon Gruber, the Senate’s tax on cadillac health plans is good policy because it
would reduce the incentives for employers to provide excessively generous insurance, leading to more cost-conscious use of health care and, ultimately, lower spending.
Gruber is right, and virtually every economist agrees. The ideal reform would combine increased taxation of employer-provided health insurance with offsetting reductions in personal or corporate income taxes. Both changes would reduce distortions in the tax system and allow government to raise any given amount of tax revenue with a smaller negative impact on the economy.
But that does not mean government should expand spending, on health insurance or anything else. That is a logically separate question.
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