The President’s Proposed Standard Deduction for Health Insurance

Greg Leiserson,
Leiserson headshot
Greg Leiserson Director of Tax Policy and Senior Economist - Washington Center for Equitable Growth
Jason Furman,
Jason Furman Aetna Professor of the Practice of Economic Policy - Harvard University, Nonresident Senior Fellow - Peterson Institute for International Economics, Former Brookings Expert
Leonard E. Burman, and
Leonard E. Burman Institute Fellow - The Urban Institute, Co-founder - Urban-Brookings Tax Policy Center
Roberton Williams
Roberton Williams Principal Research Associate, Urban-Brookings Tax Policy Center

February 15, 2007

The paper describes the new standard deduction for health insurance, proposed in the FY2008 Budget, and evaluates the extent to which it would meet its stated goals of expanding health insurance coverage and restraining healthcare spending, and its effects on the distribution of tax burdens in the short and long terms. The basic approach would improve the market for health insurance, but inadequate attention was paid to problems in the nongroup market or those facing households with low incomes.

In consequence, the plan could actually reduce overall insurance coverage. The paper suggests a variety of ways in which the proposal could be improved so more people would be covered, including those with low incomes or in poor health.

Read full paper — (PDF – 390KB)