Wednesday, September 23, 2009

Is a mandate a tax?

There has been some blogosphere discussion of whether a health insurance mandate is or is not a tax, motivated largely by President Obama's recent assertion that "nobody considers that a tax increase." . (See, for example, Jeff Miron and Donald Marron.) The issue is largely semantic, but behind the sematics lies some interesting economics.

The best place to read about the topic is this old paper by Larry Summers. Larry says, "Essentially, mandated benefits are like public programs financed by benefit taxes." But there is much more to Larry's article than that. Please click through to the paper and read it for yourself.