Limiting the tax preference so it does not include truly excessive benefits would increase federal revenue from the employers or employees who currently share such benefits. Relative to no limit, that would reduce deficits and increase equity. When citizens agree to a tax break, it should be for some agreed level of support. From this perspective discouraging “Cadillac” plans is perfectly reasonable; the challenge is defining what makes coverage a luxury rather than a standard of decency.
Unfortunately, the tax as enacted does not address the question. Instead, the law defines excess as a level of spending by employers on benefits. Yet spending is only weakly related to benefits.
Read Full Article »