The Effect of Tax Preferences on Health Spending

34 Pages Posted: 5 Feb 2008 Last revised: 15 Aug 2010

See all articles by John F. Cogan

John F. Cogan

Stanford University - The Hoover Institution on War, Revolution and Peace; National Bureau of Economic Research (NBER)

R. Glenn Hubbard

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Daniel P. Kessler

Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Date Written: January 2008

Abstract

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.

Suggested Citation

Cogan, John F. and Hubbard, Robert Glenn and Kessler, Daniel Philip, The Effect of Tax Preferences on Health Spending (January 2008). NBER Working Paper No. w13767. Available at SSRN: https://ssrn.com/abstract=1090475

John F. Cogan (Contact Author)

Stanford University - The Hoover Institution on War, Revolution and Peace ( email )

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Robert Glenn Hubbard

Columbia Business School - Finance and Economics ( email )

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Daniel Philip Kessler

Stanford Graduate School of Business ( email )

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650-725-6152 (Fax)

National Bureau of Economic Research (NBER)

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