January 2010

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Is licensing tax preparers a good idea?

January 7, 2010 in Regulation, Taxes | 3 comments

The USA Today writes that “the IRS has proposed a broad initiative that would require hundreds of thousands of tax preparers to register with the government, pass a competency exam and adhere to ethical standards.”  This sounds like a good idea as it will safeguard individuals from unscrupulous tax preparers.  But who will this truly benefit?

If you want a high quality tax preparer, there are many reputable companies that can prepare your taxes.  These tax preparers will be well trained and you’ll pay more for them.  Firms have an incentive to maintain this quality so their customers continue to require their services.  If quality is above average over the long run, they can build a reputation and charge higher prices.  Thus, for individuals who already have high quality tax preparation, there is no benefit.  In fact, there could be an increase in cost to these individuals if the government standards require additional training that does little to improve quality.

This idea will most certainly hurt poor immigrants.  When I was in college, I spent my Saturdays in the spring doing tax preparation for immigrant farm workers in Kennett Square, PA.  I worked for a non-profit legal firm.  I receive training on the basics of tax preparation.  Because most of these migrant workers had little assets and no mortgage, doing their taxes was simple.  If an individual had a more complex tax return (e.g., if they had a mortgage), I would refer them to the supervising lawyer.  The migrant workers received their tax preparation for free since we were volunteers.  However, this practice may not continue into the future.

If the government requires everyone who prepares taxes to pass through an onerous training program, fewer volunteers will decide to participate in free tax clinics.  Many non-English speaking Americans may not fill out their taxes themselves.  Further, the non-profit’s scope of their program will likely decrease if they have to pay for additional training for all their staff. 

Also, how will the government guarantee people will act ethically?  Will they give them a test of what is ethical?  Will they ask nicely ask people not to do a bad job?  

In short, licensing tax preparers is a bad idea.

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California’s Current Health Insurance Market

January 6, 2010 in Health Insurance, HSA, Managed Care | No comments

The California Healthcare Foundation looks at the latest health insurance trends in the nation’s most populous state.

  • In California, like in many states, there is a blurring line between what defines an HMO compared to other forms of health insurance.  Almost all insurance carriers now offer “a broad array of products, some of which do not conform to traditional product designs.”
  • While HMO enrollment has declined in other states recently, HMO enrollment has been steady in California.  Over 60% of commercial enrollees have either an HMO or POS plan.
  • California has 2 health insurance regulatory bodies: the Department of Managed Heath Care (DMHC) and the California Deparment of Insurance (CDI).  DMHC is responsible for regulating all HMO plans and some PPO plans, while CDI regulates other PPO plans.
  • Consumer Directed Health Plans are gaining ground.  Most large employer offer CDHPs as one choice among many health insurance options.  On the other hand, many small businesses are replacing traditional health insurance products with CDHPs as the employees only option.
  • Anthem, Aetna and Cigna have introduced 3 tiers of network physicians.  There is a high-performance tier (based on physician cost and quality), a second in-network tier, and an out-of-network tier.
  • Some employers have cut cost by giving employees a narrow network plan, which gives them access only to a narrow set of physicians out of the carrier’s entire network.  For instance, when Scripps Health System in San Diego started paying doctors via fee-for-service, many plays excluded Scripps doctors from many benefit packages.  Other plans are attempting to remove the UCSD Medical Center physicians.

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AEA 2010

January 2, 2010 in Economics - General | 1 comment

The American Economic Association annual meeting will be in Atlanta this year.  Joseph Stiglitz will give the keynote address on “Homoeconomicus: The Impact of the Economic Crisis on Economic Theory.”  

I will be attending the conference from January 2 to January 5.  Posting will return after I return.

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