Casey Mulligan argues that the typical figures we see on government subsidies for private health insurance underestimate their real level. A common technique is to calculate the income tax revenue that is lost because of the exclusion of employer payments for health care and health insurance from the worker’s taxable income. But more is involved:
- Employer health care payments also escape the (FICA) payroll tax.
- They escape state and local income taxes as well.
- And they are excluded from the determination for eligibility for food stamps and other means-tested entitlement benefits.
Given estimates that the overall marginal tax rates for the poor and the near poor are 50% or higher, government is implicitly paying for more than half the cost of insurance for those at the bottom half of the income ladder.