On Mandates and Tax Benefits
Further to my missive last night, posts stating that the House Republican budget repeals the employee exclusion for health insurance premiums have been (thankfully) corrected – because the House-passed document contains no such policy. But it’s worth examining the original post in greater detail, since it displays some interesting, and questionable, logic about what does and doesn’t constitute a government mandate. The premise is that proposals in Chairman Ryan’s Roadmap (but NOT in the budget Chairman Ryan drafted) to replace the current exclusion with a tax credit represents a mandate on the American people to buy health insurance, because “people who choose to carry health insurance have a lower tax bill than they would if they chose not to.”
There are several problems with that logic. First, it applies right now, and has for decades – thanks to the employee exclusion, people who purchase employer-provided health insurance have a lower tax bill than people who opt out of their employer’s health plan. The Ryan roadmap is actually designed to level the playing field, by ending the tax disparities between people who purchase insurance from their employer and those who buy it on their own. But the bigger point is this: The employee exclusion has existed since World War II, and at no point has anyone remotely argued that this tax benefit implies a government-opposed mandate to buy insurance.
From a broader perspective, the argument that giving some people tax benefits for committing certain actions constitutes a mandate raises key questions, based upon the HUNDREDS of tailored tax provisions in the Internal Revenue Code (a full list is available in Chapter 17 here):
- Does the exclusion of benefits and allowances provided to servicemen mean that the federal government is operating under a de facto draft, because servicemen pay less in taxes?
- Does the mortgage interest deduction mean that Washington is forcing people to buy houses, just because some homeowners receive a tax break? (Candidate Obama derided the idea of solving homelessness “by mandating everyone buy a house” – which of course implies that the federal government does not have such a policy currently.)
- Does the deduction for student loan interest mean the federal government is mandating individuals go to college?
Most people would answer the above questions in the negative. That’s not to imply that targeted tax benefits represent good policy – both Republicans and Democrats have broadly argued for tax reform that eliminates or reduces tax benefits while lowering rates overall. But even the Congressional Budget Office in 1994 acknowledged the unique nature of an individual mandate to purchase insurance, when it stated that such a requirement would be “an unprecedented form of federal action,” noting that “the [federal] government has never required people to buy any good or service as a condition of lawful residence.”
Given how unpopular the individual mandate remains, it’s perhaps not surprising that left-leaning observers would want to find mandates in Republican proposals. (Note that by this logic, even if Democrats repealed the individual mandate in PPACA, they would still have a de facto mandate in place, since individuals who didn’t buy insurance would pay higher taxes.) But given the unique nature of PPACA’s individual mandate – which the non-partisan Congressional Budget Office acknowledged – it’s safe to say that these phantom mandates in Republican health plans don’t exist.