How much tax revenue does the Treasury lose by exempting employer-based benefits from households’ taxable income? $785.1 billion over the next five years, according to the latest estimate by the Joint Committee on Taxation.
To put that in perspective, Obamacare’s exchange premium tax credits and cost-sharing subsidies are reckoned to amount to $276 billion over the same period. So the exclusion of employer-based benefits from taxable income costs 2.8 times more than the Obamacare tax credits.
I anticipate your objections: Yes, the exclusion is not a subsidy, whereas the Obamacare payments clearly are. Nevertheless, if everyone received the same tax credit, it would be a lot fairer and easier to navigate than taxing high-income households via Uncle Sam’s left hand to fund Obamacare subsidies (not to mention Medicare and Medicaid) for other households; and then giving them a significant tax break via Uncle Sam’s right hand for their own health benefits. A universal, refundable tax credit for every household would simplify our healthcare finances dramatically.