Leonard E. Burman makes the case in the Washington Post:
With union membership shrinking and wages strained, it might sound crazy to argue that labor should voluntarily give up a huge fringe benefit: tax-free health insurance provided by employers. But it should. In the long run, capping the amount of health insurance that employers can provide tax-free would raise workers’ wages, partially protect them from layoffs and speed rehiring after a downturn.
My own view is that total compensation should be taxed rather than just wages. Not only does the present system understate the true cost of labor, at least in the minds of workers and encourage bad behaviors as pointed out by Mr. Burman, it gives an unfair subsidy to large organizations at the expense of their smaller competitors.
It’s a shame that at least as things look now taxing healthcare insurance benefits is one of the provisions least likely to make it into a reform bill.
Rent seeking in action. It maybe a shame, but in my view totally and completely predictable.
It would also violate one of President Obama’s campaign pledges as a huge, huge number of households making $250,000/year would get substantial tax increases. Not exactly a good thing to do in the middle of a severe recession.