The Effect of Tax Preferences on Health Spending
In this paper, we estimate the effect of the tax preference for health insurance on health care spending using data from the Medical Expenditure Panel Surveys from 1996-2005. We use the fact that Social Security taxes are only levied on earnings below a statutory threshold to identify the impact of the tax preference. Because employer-sponsored health insurance premiums are excluded from Social Security payroll taxes, workers who earn just below the Social Security tax threshold receive a larger tax preference for health insurance than workers who earn just above it. We find a significant effect of the tax preference, consistent with previous research.
We would like to thank Joe Antos, William Gentry, Michael Smart, George Zodrow, two anonymous referees, and seminar participants at Stanford and the Brookings Institution for helpful comments; Peter Banwarth for exceptional research assistance; Kate Bundorf for the idea of using the Community Tracking Study (CTS); and Peter Granda of the ICPSR for help in obtaining the CTS data. Kessler gratefully acknowledges support from the National Institute on Aging through the NBER. Contact authors at firstname.lastname@example.org. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
THE EFFECT OF TAX PREFERENCES ON HEALTH SPENDING AUTHOR(S) Cogan, John F.; Hubbard, R. Glenn; Kessler, Daniel P. PUB. DATE September 2011 SOURCE National Tax Journal;Sep2011, Vol. 64 Issue 3, p795