Since the passage of Section 125 of the Internal Revenue Code in 1978, cafeteria plans have offered employees a choice of tax-free fringe benefits. Although these plans have been popular with employers and employees, Treasury Department officials and many tax lawyers soon came to regard Section 125 as a mistake. The Treasury has tried to reclaim through regulation the revenue and the fundamental principles of tax law it had asked Congress to give away in 1978. This paper is a history of Section 125 that emphasizes its relationship to health policy. On the basis of interviews and printed primary sources, the paper argues that Treasury officials made a less than rigorous assessment of the impact of cafeteria plans because they were preoccupied with a larger agenda of making tax-free benefits more equitable. Moreover, they saw no reason to collaborate with the health policy community to plan this agenda; they saw themselves as implementing a social policy already in the Internal Revenue Code.
Research Article|August 01 1987
Tax Policy as Social Policy: Cafeteria Plans, 1978–1985
J Health Polit Policy Law (1987) 12 (4): 609-664.
Daniel M. Fox, Daniel C. Schaffer; Tax Policy as Social Policy: Cafeteria Plans, 1978–1985. J Health Polit Policy Law 1 August 1987; 12 (4): 609–664. doi: https://doi.org/10.1215/03616878-12-4-609
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