From John Goodman:
Most people who purchase private insurance today benefit from federal tax subsidies that total about $300 billion a year. Yet the system is completely arbitrary and unfair. The amount of tax subsidy any particular individual receives depends upon whether the insurance is obtained through an employer, what options the employer offers, the family’s tax bracket, and other factors. For a middle-income family facing a 25 percent federal income tax rate, a 15.3 percent Federal Insurance Contributions Act (FICA) tax and a 5 percent state income tax rate, the ability of an employer to pay premiums with pre-tax dollars is a subsidy worth 45.3 percent. Government is efficiently paying almost half the cost of the insurance.
Because the amount of subsidy depends on the employee’s tax bracket, the largest subsidies are given to people who need them least. In addition, the system encourages waste. The more expensive the insurance, the larger the subsidy. Also, since most of the uninsured do not have access to employer provided coverage, they get little or no tax rebate when they purchase insurance on their own.
