Cogan, John F.; Hubbard, R. Glenn; Kessler, Daniel P.
September 2011
National Tax Journal;Sep2011, Vol. 64 Issue 3, p795
Academic Journal
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 fi nd a signifi cant effect of the tax preference, consistent with previous research.


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