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6 ways to make tax reform happen

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4. Reform health-related tax breaks

Many employers provide health benefits for their employees, but employees don’t pay tax on these benefits. Excluding them from taxable wages is the single biggest tax break in the entire code, costing the federal government almost $200 billion each year. 

Not only that, the exclusion also encourages giving employees overly lavish health insurance plans in lieu of additional wages. Capping or phasing-out the exclusion would increase revenue to help pay down the federal debt and lower private health-care spending. It should even help reverse the trend of stagnating middle class wages, as employers shift some compensation back toward cash.

Further, the current tax code subsidizes health costs that not even lavish health plans cover, through Flexible Spending Accounts. Eliminating this subsidy would help to pay down the debt by upward of $100 billion over 10 years.

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