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Equitable Taxation and the Provision of Health Insurance Subsidies
Author(s) -
NICHOLS DONALD R.,
PLUMMER ELIZABETH,
WEMPE WILLIAM F.
Publication year - 2011
Publication title -
business and society review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.524
H-Index - 21
eISSN - 1467-8594
pISSN - 0045-3609
DOI - 10.1111/j.1467-8594.2011.00392.x
Subject(s) - taxable income , equity (law) , subsidy , business , public economics , insurance policy , casualty insurance , self insurance , group insurance , health care , general insurance , health insurance , actuarial science , income protection insurance , health policy , key person insurance , economics , economic growth , accounting , political science , law , market economy
Current U.S. income tax laws allow many taxpayers to exclude from taxable income part or all of the cost of acquiring health insurance through an employer‐sponsored benefit plan. This favorable tax treatment generally applies regardless of whether the employer or employee actually pays the health insurance premiums. We describe the effects of this tax policy on the U.S. tax system's horizontal and vertical equity. We also explain how taxpayers covered by employer‐sponsored plans are significantly subsidized by the government in acquiring health insurance, whereas taxpayers who acquire health insurance by other means or who are not covered by health insurance at all receive no such government assistance. We conclude that any prospective health‐care policy initiatives, including modifications to the 2010 health‐care reforms, should contemplate both the horizontal and vertical equity of the tax treatment of health insurance premiums.