In the NY Times over the weekend, and in other publications on other days, there is talk in DC about taxing health benefits of employees.
This is not something that comes up in state level reform, even in states like California with a personal income tax, because the level of state income taxes is so much less than the federal income tax.
Tax types seem to think this makes sense because the tax deductibility of health benefits is regressive—that is, it is worth more as you go up the income scale.
There is some truth to this, but it is also true that eliminating the deductibility of health benefits practially impacts the middle class.
Is a single individual making $55,000 a year with health coverage rich? Or an insured family of three living on $90,000? No, certainly not in most of California. They are not poor, but they are watching their budget in our high cost-of-living state. Yet both those instances are people over 500% of federal poverty.
So does it make sense to tax the health benefits of a family living on $90,000 a year?
And what exactly are “gold-plated” benefits? When some talk this way, usually they are referring to low cost-sharing—low deductibles, low copayments—precisely the benefits that are needed by those in the middle to make sure they get routine care. In an era in which lots of Americans are skipping medications, skipping doctor visits, not getting needed lab tests because of health care costs, now there is talk of taxing the kind of health benefits that make prescription and doctor visits affordable for working families.
Good health benefits encourage primary and preventive care. Good health benefits make possible management of chronic conditions like diabetes and heart disease. People with these conditions face a lifetime of drugs, devices, doctor visits, and lab tests. Taxing the benefits that make it possible for people to manage these conditions feels very wrong.
We find it ironic that some of those in the US Senate, sometimes called the millionaires club, think it is wrong to limit income tax deductions that the most affluent taxpayers claim but somehow right to tax the health benefits of the middle class. We might expect this from a Senator who own seven houses, but it is disappointing to hear it from others.