If there is one thing that tends to unite economists across the political spectrum it’s the view that the government should not give unlimited tax subsidies to employer-provided health insurance. Yet that is what we have been doing. To remedy the problem, in place of the Cadillac Tax, we should offer employers and their employees the option of a dollar-for-dollar tax credit up to the amount of the tax subsidy they have been getting through the tax exclusion. This would solve the problem economists complain about, put health insurance and take-home pay on a level playing field at the margin, and greatly reduce the incentives we all have to over-spend on health care.
