Taxing Health Benefits

April 3rd, 2009 | Sources: Washington Post


Since just about nobody likes the Big O’s plan to pay for health care by taxing the rich, lawmakers are floating the idea of taxing employee health benefits instead.


The current loophole reduces taxable earnings by $9,000 per year for those with family coverage, so probably not too many people are going to like the new idea, either.

Other than the flotilla of economists and tax experts that is, who have pointed out for years that the current exemption encourages people to sign up for Cadillac plans which shield exposure to true health care costs and thus contribute to cost escalation.

Recently, a bipartisan group of Senators got behind the idea of taxing health benefits.

The group includes Oregon Democrat Ron Wyden who said “it’s important to show Americans that you’re making savings in the enormous sums now being spent on health care before you go and ask them for billions of dollars more.” 

The Big O has a political problem with the idea of taxing health benefits, in that he lambasted Top Gun during the presidential campaign for making the very same idea central to his health proposals.

It’s a tax increase, scoffed Obama at the time.

Adding to the irony is that 2 years ago a Democratic-controlled Congress zapped the idea after George W. Bush put it in his budget request.

Nevertheless, the Big O is signaling he can swallow a health benefits tax if he has to for the greater good.

Why just last week White House budget director Peter Orszag said that taxing workers’ health benefits “most firmly should remain on the table,” according to the Washington Post.


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