The Agenda

A Peculiar CTJ Report

Matt Yglesias considers this report on the Ryan Roadmap from the Center for Tax Justice very useful.

The interesting thing, however, is that when the Center for Tax Justice (PDF) ran the numbers, they discovered that this isn’t the kind of tax cut that makes your taxes lower. On the contrary. Most Americans will pay higher taxes under Ryan’s plan than under Obama’s. Only the very richest will pay less.

There is a small problem, however. Please note the fine print.

Note: Figures do not include impact of replacing exclusion for employer-provided health benefits with credit for health insurance.

Obama baseline excludes temporary extension of the Making Work Pay Credit.

My understanding is that the impact of the current tax exclusion is powerfully regressive. I could be wrong about that. But it seems like a rather significant item to leave out of the analysis.

Matt also believes that replacing the tax exclusion with a refundable tax credit would destroy the private health system.

That said, the plan would also likely destroy the private health insurance system in the United States by eliminating the tax preference for employer-provided health insurance plans. This tax preference is not very good public policy, but it’s a hidden government intervention that’s critical to making our “private” insurance system work, insofar as it works at all. Without it, absolutely everybody is going to wind up on a totally dysfunctional individual market. For rich people, who’ll be getting a giant tax cut, this is fine since just paying out of pocket will be a small price to pay for Ryan’s massive enrich-the-rich tax policy. For everyone else it’s a problem.

This is an interesting idea. My sense is that many scholars believe that a private health insurance system does not require a tax preference for employer-provided health insurance plans, though it could be that “destroy the” is doing a lot of work here. Yes, this would mark a departure from the status quo. And I think I can comfortably say that “the” private health insurance system is pretty problematic, and if getting rid of a regressive tax preference would “destroy” it, well, I’m comfortable destroying it, just as various centrists and liberals are comfortable destroying “the private health insurance system” through various provisions in the Senate health bill.

I’m sorry to say that similar language was deployed against the Wyden-Gregg proposal. The Ryan Roadmap does not offer detailed ideas on reforms for the individual insurance market. It is also true, however, that Ryan has called for the creation of state-based insurance exchanges, and one assumes that he’d be open to a wide range of regulatory approaches to make the individual insurance market work better. 

Getting on a plane, but will be back soon.

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

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