Taxing Health Benefits II

June 1st, 2009 | Sources: Washington Post

Subjects:

Among the bevy of options to fund health system reform, a tax on employer-sponsored health insurance now appears to be gaining momentum faster than Oprah Winfrey on a Luge track.

doesthegeniehave$1.2trill?The idea apparently won general acceptance during last week’s Senate Finance Committee meeting, and House Democratic opposition has begun to melt as well.

The Big O has a political problem with the tax, since he pasted Top Gun during the presidential campaign for making the very same idea central to his health proposals.

And Republicans will surely remind people that 2 years ago, a Democratically-controlled Congress zapped the idea after George W. Bush put it in his budget request.

Nevertheless, the Big O has signaled he’s happy to absorb the hit if it’s for the greater good.

US Census data show that in 2007, 177 million Americans received health benefits from their employers. Currently the benefits are not taxed as income. Congressional tax analysts estimate that closing the yawning loophole would have generated $133 billion last year.

Senate Finance Committee Chairman Max Baucus would prefer not to close the loophole altogether. He’s suggested two alternatives—limiting the tax to high-income earners, or taxing the benefits after they exceed a pre-set limit.

The former option may not raise enough cash, and if that income limit is dropped too far, “you’re impacting workers and threatening the employer-based system,” Senator John Kerry told the Washington Post.

Yet capping employer-provided health benefits, somehow, some way could generate upwards of $500 billion over the next decade. No one’s come up with another politically viable method that could raise anywhere near that kind of dough.


 

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