Question of the Week: Health Benefits
These questions are culled from phone calls, letters, faxes and e-mails sent to my Thousand Oaks, Solvang, and Washington offices. Each week I will add another question and answer.
Week of July 3, 2009
• Question: Are employer-provided health insurance benefits tax exempt?
→ Answer: For more than 50 years, employer-provided health insurance has not been counted as income for federal income, payroll and state tax purposes.
Congress is currently debating several ways to pay for health insurance reform. According to the non-partisan Congressional Budget Office, one proposal to extend insurance to approximately 16 million people (which would cover approximately one-third of the uninsured) would cost at least U.S. taxpayers $1.1 trillion over 10 years.
One proposal to pay for the cost of extending health insurance to the uninsured would be to impose new taxes on either all or part of the cost of employer-provided health insurance benefits. The amount of money raised by this proposal would depend on whether the entire exemption would be repealed and how workers and employers adjust to the new law.
For more information about tax exclusion for employer provided benefits, please see the Congressional Research Service report, The Tax Exclusion for Employer Provided Benefits: Policy Issues Regarding the Repeal Debate.
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