Jason Furman argues that the reason the ACA needed the “cadillac tax” is because compensation was skewed towards providing benefits rather than take home pay.*
He is correct that compensation is skewed.
He does not mention that compensation was skewed because of past legislation that favored the provision of healthcare as a benefit as a substitute for paying out something that employees could take home and spend as they like.
So, Furman’s solution to a distortionary tax is a second distortionary tax.
Folks, this is a Frankenstein monster. You do not fix bad policy by stapling a second bad policy on top of it. You fix bad policy by deleting the bad policy.
But, of course, the second bad policy got passed because it adds to the bottom line for the government.
Mr. Furman: please step into the pitch and take one for the team … walk away from policy analysis.
Via Marginal Revolution.
* Just to fill in the blanks here, Furman is a former member of the Obama White House who writes about policy from an economic perspective, the ACA is the formal acronym for Obamacare, and the cadillac tax is a tax going into effect in a few years on private health insurance plans that cost too much — basically, if your health plan is too good, the government will make you pay a penalty for that.