Dear Senator Daschle,
In part 1 I brought up the issue of the difficulty in choosing affordable health care coverage that meets an individual’s needs. Now I’d like to discuss the goofy tax laws associated with health care coverage.
If your employer pays for health care coverage, it’s an untaxed benefit. You pay no income tax or FICA on those earnings. Wonderful. If your employer only partially pays for your health care coverage, you get stuck paying for the difference with post-tax dollars. If your employer doesn’t pay for health care coverage or you’re unemployed, you pay for it all with post-tax dollars. Your only hope for relief is if your health care costs are above the itemized deductions threshold. If you are self employed you can deduct the cost of health care coverage premiums from your adjusted gross income after the self employment tax has been computed.
Health Savings Accounts are a nice effort, but really don’t help. You have to be enrolled in a high-deductible health plan, the returns typically don’t cover inflation and the tax savings may be marginal. Flexible spending accounts have similar benefits without the constraint of a high-deductible health plan, but its use-it-or-lose-it approach makes it confusing.
Senator Daschle, this is freakin’ nuts. Here’s a wacky idea. Revoke all health care coverage for members of Congress for two years. Let them fend for themselves like so many of their constituents. That should fix things.