Essay on The Policy Of Taxing Healthcare Premiums

1085 Words Dec 17th, 2016 5 Pages
One issue I see is that the policy does not account for decreased wages and the effect on total annual revenue from income for both the federal government and state government. Income tax is the greatest source of revenue for the federal government. One of the assumptions of the model is that employers will reduce wages of their employees by the amount of the tax they will owe. What impact will that have on tax revenue? The federal tax rate is higher than the social security tax, so the revenue is really just re-distributed specifically to the social security program. Another issue is that the policy will have no impact on social security for at least 10 years. While the plan is intended to be perpetual and 10 years is a small time frame on the grander scale, a policy which has no impact over a time period that long will make it difficult for short-term thinking policymakers to agree on implementing without significant positive impacts.
This policy of specifically taxing healthcare premiums seems like an inefficient way to raise revenue for social security. It is possible the hope is that the amount is small enough that both businesses and employees will not notice the difference, which would lead to the government receiving the full amount it intends. In contrast, the economic burden will ultimately fall on workers who are paying the tax. Businesses who acknowledge the tax is impacting their business financials will either hold wage growth or reduce wages to match the…

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