The Agenda

From Exclusion to Standard Deduction

My guess is that Keith Hennessey is not a fan of the Wyden-Bennett healthcare plan, but like Wyden and Bennett, he favors scrapping the tax exclusion for employer provided health insurance and replacing it with a standard deduction. This strikes me as an excellent idea.

Over the longer term, however, I think we should move in the direction of an earmarked VAT that would finance vouchers for the purchase of private coverage, an approach modeled on the Emanuel-Fuchs plan. But while the Emanuel-Fuchs proposal calls for a comprehensive benefits package, my view is that an earmarked VAT should fund a barebones safety net that provides for preventive medicine and income protection. For anything beyond the basics, individuals and families would have to pay for supplemental private coverage, as in the French system. This, alas, is a pipedream. In the real world, a Hennessey-style standard deduction is probably the best way to go.   

Reihan Salam is president of the Manhattan Institute and a contributing editor of National Review.

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