REFORM: Health and Taxes -- VAT's That?

Ordinary Americans may not realize how closely linked their health care is to the U.S. tax code, but a bevy of analysts and economists could give them an earful. The major health reform plans on the table involve changes—in some cases pretty significant changes to tax treatment of health insurance, particularly the tax breaks for insurance we get through our jobs. Over at the Taxvox blog, sponsored by a joint program of the Urban Institute and the Brookings Institution, Howard Gleckman explains some of the options in a post nicely titled, "Forget Death and Taxes, How About Health and Taxes?"

Gleckman focuses on proposals for a Value Added Tax or VAT, a model seen in several European countries. VAT scenarios are circulating more in the academic/think tank world right now than in the political discourse about health care, but as Gleckman points out:

"The expiration of the Bush tax cuts and the ongoing Alternative Minimum Tax mess will surely drive big tax changes in 2009 or 2010. Health reform is also on the table, although short-term odds for reform may be longer. The question is: How will these two mega-issues fit together?"

A second question, of course, is how would a VAT be implemented—what other subsidies, refunds, credits, exemptions, etc. would cushion poor people from what would otherwise be a regressive tax? VAT isn't the focus of the New America health policy program but we're open to all sorts of ideas that could help us cover all Americans, control costs, and improve quality.