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Discussion Paper
The “Cadillac Tax”: Driving Firms to Change Their Plans?
Since the 1940s, employers that provide health insurance for their employees can deduct the cost as a business expense, but the government does not treat the value of that coverage as taxable income. This exclusion of employer-provided health insurance from taxable income?$248 billion in 2013, according to the Congressional Budget Office?is a huge subsidy for health spending. Many economists cite the distortionary effects of this tax subsidy as an important reason for why U.S. health care spending accounts for such a large share of the economy and why spending historically has grown so ...