Taxing Health Insurance

The centerpiece of bureaucracy-based health care reform like the proposal Governor Richardson continues to push is “universal coverage.” By this, advocates mean that if we all have health insurance then everyone will have access to health care. Sounds good enough even if the actual policy implications are a lot messier than they appear at first glance.
As I have written in the past, however, before governments embark upon dramatic “reforms,” we should make sure that current policies are not unnecessarily hindering the ability of New Mexicans to access quality health care. One policy I just discovered that is undoubtedly making health insurance and health care less accessible than it should be is taxation. Specifically, taxation of insurance premiums. Simply put, if you tax something you get less of it; if you eliminate taxes on something, you’ll get more of it.
Surprisingly enough, New Mexico levies a 4% tax on health insurance premiums! This means that for every $100 your employer or you pay for health insurance, the government gets $4. That doesn’t seem very smart if “universal coverage” is the goal. Actually, the original tax was 3%, but back in 2004, the Legislature and Governor Richardson apparently decided that health insurance wasn’t expensive enough, so they added a 1% surcharge.

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