Should Employer Provided Health Insurance Benefits be Taxed? ~ dnd


Recently a segment of the health care debate asks if employer provided health insurance benefits should be taxed as normal income.  My response: ya’ darn tootin’, and there are two good reasons for it.

1. Untaxed benefits which are not provided to all is inherently unfair.  Some get it some don’t.  Those that don’t,  have to pay for health insurance with out-of-pocket post-tax dollars.  Money set aside in an HSA can’t be spent on insurance premiums.  You won’t be able to deduct it from your income tax until the your medical expenses go beyond 7.5% of your AGI.  And for this you’re required to itemize your deductions.  There’s a good chance that if your employer is not providing those benefits to you, your income is at a level where you’re better off taking the standard deduction than itemizing your deductions.

2. Having these benefits show up as income on your 1040 will give you a clue as to just how expensive for-profit health insurance is.  If you receive health insurance benefits from your employer, you are not an empowered, smart consumer, searching for the best plan for the least cost.  At best you get to choose between a handful of plans provided by an insurer who was chosen by your employer.  So there are no benefits of the free market.  Kinda like getting a ham instead of a check for a Christmas bonus.

Ok, ok, I realize there would be political holy hell to pay for taxing these benefits.  Tax increases are never popular.  And raising taxes during a recession doesn’t make economic sense.

I’ll come clean here.  My point is that the difficulty with fixing our health care system is not how to provide affordable health care for all.  If we started with a clean sheet of paper, it’d be easy.  The problem is cleaning up the mess of a system we’ve created.



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22 responses to “Should Employer Provided Health Insurance Benefits be Taxed? ~ dnd

  1. nannymm

    I totally disagree with you on this one, dnd. Many people could not afford the taxes on their benefits. I’m thinking of the lower and lower-middle income employees of major corporations and government agencies, in particular. Those health benefits they get are often the primary reason why people take and remain in some of these low level jobs. If you start taxing their benefits, they will experience severe hardship. Even many middle income families would face real hardship. The whole point of healthcare reform is to alleviate some of the hardship for all Americans, not to create more. Those with high incomes (say $500,000 or more) would not have that kind of hardship. They are the ones who have reaped the benefits of an unjust system for decades; they are the ones who need to kick in a bit more now.
    As to your other point that it would be easier to fix this if we were starting with a clean slate rather than trying to clean up a long standing mess, I couldn’t agree more. That’s why I think we’d be better served if we scrapped our entire system and went to a single payer healthcare program. We could start from scratch and design it well. We could phase it in by starting with the enrollment of all the uninsured and under-insured, then gradually adding others until everyone was in. Yes, it would be the end of the “for profit” mess we have now. Good riddance!

  2. dnd

    The issue with taxation if fairness. If we’re not gonna tax health insurance benefits, then people w/o benefits should be able to purchase health insurance with pre-tax dollars.

  3. Morning peeps,

    dnd I’m a bit surprised by your post today. Didn’t you and I have this discussion once and you were dead against taxing employer provided benefits? I very much dislike the reliance we place on employer provided health care, I think it’s bad public policy for a lot of reasons. The unfairness of it being an untaxed form of income is just one problem I have with it. Not only would taxing the benefit add some equity to the tax code, I think it would help to accelerate the process of moving us to a single payer system.

  4. dnd

    What’s interesting is that the Republican leadership is saying this is “too important” to rush this through. Humm. If it’s so important, why haven’t they been working on this before Obama put it front and center?

  5. nannymm

    Well, I suspect the answer to that is that they don’t want any reform. They’re covered and their big donors are, also. And to hell with the rest of the population.

  6. They had 6 years to deal with it and did nothing, now they should just get out of the way.

  7. nannymm

    Dnd, I agree that people without insurance should be able to purchase it with pre-tax dollars IF THEY CAN. But I still disagree that employer provided benefits should be taxed except for very high wage earners.
    The problem with anyone purchasing their own insurance plan is that it is nearly impossible to get a quality plan at an affordable price. For many, it is impossible to get any plan at any price. Most middle and lower income people simply don’t have the money to buy private insurance. What we need is single payer health insurance for everyone.

  8. nannymm

    Actually Brian, they’ve had a lot longer than that. All they ever do is obstruct efforts to rectify the situation. As you and I discussed last night, this goes back to the days of TR. So, yes, the repugs should just STFU and get the hell out of the way. If they don’t, then the Dems and Obama need to shut them up and push them aside. Enough is enough!

  9. dnd

    Ok, here’s another funny thing. The right keeps saying that small businesses employ the most people and everything should be done to support them.

    Well, the biggest boost to small business would be a public plan. Health insurance benefits cost small businesses more due to the smaller risk pool. If they don’t provide health insurance benefits they lose high quality employees to employers who do. A public plan solves the problem.

  10. nannymm

    More from the right wing wackos:

    KATRINA WASN’T AN EMERGENCY?…. Rep. Marsha Blackburn (R), a far-right lawmaker from Tennessee, was on the House floor this morning, extolling the virtues of a balanced budget and PAYGO rules. Blackburn lost sight of these concerns during the Bush/Cheney years, but there’s a lot of that going around.

    But as part of her speech, Blackburn said PAYGO rules are not, in and of themselves, good enough, because lawmakers can point to emergencies or crises that occasionally warrant exceptions to the spending rules. That, Blackburn said, is the problem.

    “Let’s agree that we’re going to have PAYGO enforcement,” she told her colleagues. “That we’re not going to cry ’emergency’ every time we have a Katrina, every time we have a tsunami, every time we have a need for extra spending, that we don’t go call for a special appropriation that allows us to circumvent the PAYGO rules.”

  11. dnd

    Liz, Liz, Liz. The nut (pun intended) doesn’t fall too far from the tree. Someone needs to tell you that your bitchy rants are precisely what’s driving moderate Republicans and independents away from the Republican party.

    “I think the Democrats have got more crazies than the Republicans do,” Cheney said. Of course you do! Because you’re crazy!

    My guess is that before he goes to bed every night, Chris Matthews gets down on his knees and prays that Liz Cheney, Michelle Bachmann and Sarah Palin will be the Republican front-runners for the 2012 presidential race.

  12. nannymm

    “My guess is that before he goes to bed every night, Chris Matthews gets down on his knees and prays that Liz Cheney, Michelle Bachmann and Sarah Palin will be the Republican front-runners for the 2012 presidential race.”

    LOL! I pray for that, too!

  13. dnd

    Tweety interviewed G. Gorden Liddy on Hardball tonight. He looks/sounds like he has dementia (Liddy, not Tweety). Anywho, Liddy has jumped on the birther bandwagon.

    Here’s something no talking head has asked a birther: As a member of the Senate Committee on Foreign Affairs, Senator Obama was granted a security clearance. In the background check for a security clearance, they verify your place and date of birth. So if Obama hadn’t been born in the USA, they’d have known it years ago.

  14. Birther = racists

    end of story.

  15. nannymm

    Dnd, shame on you! You’re trying to apply logic to an insane situation. Tsk Tsk!

  16. nannymm

    I agree, Brian. This is no conspiracy perpetuated by lunatics. Rather, it is a deliberate effort by a group of opportunistic racists to fuel the flames yet again. It’s disgusting.

  17. dnd

    I don’t think all birthers are racists. I think it’s a mixed group of racists, PUMAs, and the radical right. And those who don’t know any better 😉

  18. Like I said dnd, racists!

  19. nannymm

    Good morning. The Morning Joe gang is having quite a discussion about race this morning. This stems from the Cambridge incident that led to a white cop, Sgt. Crowley, arresting renowned black scholar Henry Louis Gates Jr. in his home Mika seems to be stuck on the issue of “is it fair that the white cop is being painted as a racist?” She doesn’t seem as interested in the question of whether it is fair that this prominent black man was arrested when he had committed no crime; neither does she ask the larger question of whether it is fair that this type of thing happens far too often to black men. I find that disturbing.

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