By Conor Clarke
Matt Yglesias says that CBO director Doug Elmendorf's testimony yesterday morning (in which he said the House is not proposing "the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount") is going to change the health-care debate. In particular, Matt says that "Elmendorf’s words will now help [Senator Max] Baucus, the [Senate] Finance Committee, and taxing health benefits all get back in the game."
I hope that's true! The idea of taxing health benefits was floated by Baucus a couple of weeks ago, but torpedoed before you could say "complicated tax loophole." But it really should come back in fashion. Capping the health-care tax exclusion is a fantastic idea -- one we should be pursuing even in the absence of the current health care debate. A little background: The employer-sponsored insurance (ESI) exclusion means that when your workplace supplies you with health care, or pays part of the cost of health insurance, it' is not considered income and you pay no tax on it. This has been described (accurately I think) as the single largest subsidy in the tax code: The government forgoes $250 billion a year to keep it around. That's a lot of money. It's also a lot of money going to a bad cause.