Reverse Fiscal Federalism
The Texas Legislature is back in session, providing its usual cookie jar of absurd economic proposals. A real winner is House Bill 649, which would provide compensatory tax reductions to companies that become taxed under the Affordable Care Act because their employer-provided health insurance fails to cover employees’ emergency contraception. Such a bill means Texas would be giving firms incentives to thwart federal law. It also opens up the possibility of much broader tax offsets. I’m certain that our governor and legislature dislike the recent imposition of higher federal income tax rates on high-income families. Why not take the logic of this bill one step further and offer tax reductions (sales tax, since we have no income tax) to very high-income families? Indeed, the reductio ad absurdum would construct all state tax policy to offset to the extent possible any incentives provided by federal tax policy.