Here Comes a Tax on Medical Insurance Benefits
President Obama's tax-the-rich plans to pay for healthcare seem to be losing support in Congress. Instead, an old idea has returned: taxing the health benefits that employees receive under employer-provided plans.
Sen. Max Baucus (D-Mont.), is the key to taxing employees on their medical benefits. He chairs the Senate Finance Committee. He wants to tax benefits by eliminating what he considers "loopholes" and by including the value of employer-provided benefits in employee compensation reported to the IRS. Over 30 other senators advocate variations of the Baucus plan and approximately 15 more advocate universal coverage that includes a tax on any employer-provided benefits.
During the campaign, Obama criticized Senator John McCain when McCain made a similar idea a centerpiece of his campaign's health plan. But the president has not ruled it out, either.
White House Budget Director Peter Orszag said taxing employer benefits was among several ideas that "most firmly should remain on the table." White House economic adviser Jason Furman called for an end to the so-called "employer exclusion" before he joined the administration. Spokespersons for House Majority Leader Nancy Pelosi have stated that the White House will accept a Baucus-type tax on benefits so long as Obama does not need to propose it.
Other Democrats, and many Republicans in both the House and Senate, see elimination of tax code provisions that allow employees to escape taxation on medical benefits as essential to healthcare reform. Taxing employees would save tax dollars and encourage more economical use of medical insurance, they say.
Beside that, Congressional sources point out that merely eliminating some tax provisions - which can be labeled as loopholes - will accomplish much of the job. It is thought to be easier to eliminate existing provisions rather than to create new ones that would accomplish the same thing. Eliminating provisions would also be likely to eliminate or cut down on the overhead costs that employers now expend to maintain tax-favored plans, which often require extensive legal, actuarial, recordkeeping and marketing expenses.
The issue was really decided last year when key Republicans signaled that they were dropping their opposition to taxing employer-provided benefits. The expected lobbying effort by business and the insurance industry to change the minds of those Republicans did not develop. In fact, key groups supported the concept, including a leading lobbying group for america's largest corporations.
Obama's advisors and Democrats on Capital Hill took that as an indication that business and the insurance industry would not resist. Now, it may be too late.
Sen. Max Baucus (D-Mont.), is the key to taxing employees on their medical benefits. He chairs the Senate Finance Committee. He wants to tax benefits by eliminating what he considers "loopholes" and by including the value of employer-provided benefits in employee compensation reported to the IRS. Over 30 other senators advocate variations of the Baucus plan and approximately 15 more advocate universal coverage that includes a tax on any employer-provided benefits.
During the campaign, Obama criticized Senator John McCain when McCain made a similar idea a centerpiece of his campaign's health plan. But the president has not ruled it out, either.
White House Budget Director Peter Orszag said taxing employer benefits was among several ideas that "most firmly should remain on the table." White House economic adviser Jason Furman called for an end to the so-called "employer exclusion" before he joined the administration. Spokespersons for House Majority Leader Nancy Pelosi have stated that the White House will accept a Baucus-type tax on benefits so long as Obama does not need to propose it.
Other Democrats, and many Republicans in both the House and Senate, see elimination of tax code provisions that allow employees to escape taxation on medical benefits as essential to healthcare reform. Taxing employees would save tax dollars and encourage more economical use of medical insurance, they say.
Beside that, Congressional sources point out that merely eliminating some tax provisions - which can be labeled as loopholes - will accomplish much of the job. It is thought to be easier to eliminate existing provisions rather than to create new ones that would accomplish the same thing. Eliminating provisions would also be likely to eliminate or cut down on the overhead costs that employers now expend to maintain tax-favored plans, which often require extensive legal, actuarial, recordkeeping and marketing expenses.
The issue was really decided last year when key Republicans signaled that they were dropping their opposition to taxing employer-provided benefits. The expected lobbying effort by business and the insurance industry to change the minds of those Republicans did not develop. In fact, key groups supported the concept, including a leading lobbying group for america's largest corporations.
Obama's advisors and Democrats on Capital Hill took that as an indication that business and the insurance industry would not resist. Now, it may be too late.
