The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.
- BLS Handbook of Methods
- Bureau of Economic Analysis
- Bureau of Labor Statistics
- Congressional Budget Office
- Economic Data - FRED® II, St. Louis Fed
- Office of Management and Budget
- Statistics: Releases and Historical Data, Board of Governors
- U.S. Census Bureau Economic Programs
- White House Economic Statistics Briefing Room
February 11, 2006
A Case Against Medical Savings Accounts
Courtesy of Gerald Prante at Tax Policy Blog, we are informed that former Congressional Budget Office director Douglas Holtz-Eakin is not a fan of the President's proposal for tax-preferred medical savings accounts:
In response to the idea of adding a tax exclusion for individually purchased health care expenses -- in addition to the current one for employer-provided care -- Holtz-Eakin had this to say:
I think it's bad tax policy. We ought to have in this country a tax system that means something. I am less in favor of tax systems that are designed to do things other than raise revenue. We are likely to spend a lot of money in the future. The government is likely to be bigger than it is now -- I don't know how much -- and we need a tax system that raises those revenues efficiently and doesn't muck up our economy too much. Things like this are a recipe for mucky up the tax system and the economy and so I really am nervous about that as -- from a tax-policy perspective, and implementation perspective.
In general, I am the picture of sympathy for this sentiment. The best tax code is one that has low marginal tax rates and a broad base. That latter requirement means that there should be minimal use of the tax code as a tool for social engineering (or, worse, political gain).
But I make an exception for health care. The fact is that we are not talking about simply adding a distortion that was previously nonexistent. Distortions are already present in the form of tax preference for employer-provided health insurance expenditures. As Andrew Samwick emphasizes in his related Wall Street Journal debate with Mark Thoma, the idea of the tax-preferred accounts to finance out-of-pocket expenditures is designed to eliminate the perverse incentives created by subsidizing insurance with low deductibles, and to improve the portability of health care provisions.
I gather that Dr. Holtz-Eakin would prefer that we address the problem by eliminating all tax preferences of this sort, and there I am somewhat sympathetic. A preferable course might well be to address some of the regulatory issues that Andrew discusses (such as making health care coverage mandatory) and dealing with the availability of coverage to the poor through a straight system of transfers (although it would be mistaken to claim that this isn't mucking up the tax system to some degree). But absent the social consensus to move in that direction, something like medical saving accounts seems like a reasonable second-best strategy.
TrackBack URL for this entry:
Listed below are links to blogs that reference A Case Against Medical Savings Accounts:
Tracked on Feb 27, 2006 1:05:29 AM
- What’s Moving the Market’s Views on the Path of Short-Term Rates?
- Lockhart Casts a Line into the Murky Waters of Uncertainty
- How Will Employers Respond to New Overtime Regulations?
- How Good Is The Employment Trend? Decide for Yourself
- Is the Labor Market Tossing a Fair Coin?
- When It Rains, It Pours
- Pay As You Go: Yes or No?
- Was May's Drop in Labor Force Participation All Bad News?
- Wage Growth for Job Stayers and Switchers Added to the Atlanta Fed's Wage Growth Tracker
- Experts Debate Policy Options for China's Transition
- July 2016
- June 2016
- May 2016
- April 2016
- March 2016
- February 2016
- January 2016
- November 2015
- October 2015
- September 2015
- Business Cycles
- Business Inflation Expectations
- Capital and Investment
- Capital Markets
- Data Releases
- Economic conditions
- Economic Growth and Development
- Exchange Rates and the Dollar
- Fed Funds Futures
- Federal Debt and Deficits
- Federal Reserve and Monetary Policy
- Financial System
- Fiscal Policy
- Health Care
- Inflation Expectations
- Interest Rates
- Labor Markets
- Latin America/South America
- Monetary Policy
- Money Markets
- Real Estate
- Saving, Capital, and Investment
- Small Business
- Social Security
- This, That, and the Other
- Trade Deficit
- Wage Growth