The New York Times misunderestimates

I like to read the New York Times, but a recent article went awry.

Bob Herbert’s column at http://www.nytimes.com/2009/12/29/opinion/29herbert.html
accuses the Joint Committee staff of wildly underestimating the gain from imposing a 40 percent excise tax on premiums paid to “so-called Cadillac health plans.” He understands that little revenue will come from the excise tax directly, because those plans will tend to disappear, taxed out of existence. He thinks that the revenue estimate depends on corporations paying out the amount saved on insurance premiums to workers as wages, who then include the income and pay more tax. A labor leader tells him corporations won’t increase wages, so Mr. Herbert thinks the revenue estimate is wrong.

Even if the labor leader is right, and corporations don’t pay more wages, the revenue is still there. The corporations will keep the money, and pay tax on it (as opposed to current law, when they deduct all health insurance premiums and employees don't include them in income).

To put it a different way:

Present law:

Case 1: corporation takes deduction, worker pays no tax.

After reform:

Case 1A: Mr. Herbert’s “not gonna happen”: corporation takes deduction, worker includes an amount in income and pays tax. There would be revenue gain if this happened, but he says it won't. OK.

Case 1B: What happens if Mr. Herbert is right: the corporation takes no deduction, so its taxable income goes up and it pays tax. The worker pays no tax, but corporation does:  the money stays in the tax system, unlike today, so there is plenty of revenue gain.

I ran this by an economist (an old friend) who should know.  He says we can argue about whether 1A or 1B will predominate, but either way, the money is there.