President Trump’s proposal to treat employer-paid fertility treatments as a “limited excepted benefit” is good, to the extent it would exempt those arrangements from various federal regulations. Under the proposal, large employers could, for example, offer fertility-treatment coverage with higher cost-sharing and lower annual and lifetime coverage limits than federal law otherwise allows. Employers would therefore have more flexibility to offer the treatments workers prefer, often at a lower premium.
At the same time, the proposal doesn’t exactly give workers more control over their lives or health care. Congress creates federal income and payroll taxes, then excludes income in the form of employer-sponsored health insurance from both. The result is that the government effectively penalizes workers for every dollar of income they don’t (1) let their employer control and (2) spend on health insurance. To the extent the proposed rule would deregulate employer-purchased fertility-treatment coverage, it would allow more such arrangements to qualify for that tax exclusion. For every $1 of tax savings workers enjoy, however, they must sacrifice control of $3 of their earnings to an employer.
So while this is a deregulatory proposal, and it would result in tax savings for some workers, it’s not much of a win for liberty, consumer sovereignty, or free markets.
Not unrelated to that disappointing conclusion is this gem from the proposed rule:
“… the expansion of pre-tax benefits decreases overall tax receipts, constituting a transfer from the government to individuals and employers.”
That assertion holds only if all income belongs to the government, even income it never collects. If the worker never gives that $1 to the government in the first place, however, it means that a transfer is not taking place between the two. (Yes, the tax code implicitly subsidizes ESI. But the subsidy does not necessarily equal the $1 tax savings; it is an indeterminate portion of the aforementioned $3. Even if implicit subsidy exactly equals the $1 of tax savings, that $1 does not “transfer from the government to individuals and employers.”)
The rhetoric of “tax expenditures” claims another logical casualty.