EconomicStudies_Analysis|PublicFinanceThe House recently passed the Tax Cuts and Jobs Act and the Senate now begins debate on its version of tax reform. Debate has centered on the tax reform's potential negative revenue effects and its disparate treatment of taxpayers with different income levels. Likewise, the American Health Care Act of 2017 was not able to find a balance between containing the growth in government health care spending and maintaining the share of the population that is covered by health insurance. A neglected aspect of both of these acts is the tax exclusion of employer-provided health insurance (EPHI). This study demonstrates that a reform of the tax expenditures on EPHI that replaces the tax exclusion with a system of tax credits can increase tax revenues, as well as restore equal treatment between high-earning and low-earning employees. This study estimates indicate that such a reform of EPHI could potentially reduce the cumulative federal deficit over the 2018-2027 period by $809 billion. These revenue gains from the EPHI reform are even more significant if one considers that they are achieved when the new tax credit system retains the incentive to buy health insurance coverage and to form employment-based insurance pools
