TAX EXEMPTION FOR EMPLOYER-PROVIDED HEALTH CARE
• Under current law, health care
benefits provided by employers to their employees are not counted as taxable
income. Similarly, employee contributions toward their health care premiums are
made on a pre-tax basis. Congress is considering ending the tax exemption for
employer-provided health benefits as a way to reduce the deficit.
• Removing the exemption will
raise taxes on those least able to afford it. For years, fire fighters have
accepted lower wages in exchange for better health coverage. Now during these
difficult economic times, many fire fighters have had their wages frozen or cut.
Taxing health benefits will only make things worse for fire fighters by adding
thousands of dollars in extra taxes.
• Removing the exemption would
unfairly penalize fire fighters simply for the work that they do. Fire fighters
face high insurance premiums due to the risks posed by their profession. That’s
why it’s common to see health plans for fire fighters exceed $20,000 a year.
Removing the exemption would unfairly tax fire fighters because of the dangers
they face in protecting the public safety.
• Fire fighters aren’t the only
ones who will be hurt. Over 150 million Americans receive health insurance
through an employer, and the value of these benefits average in excess of
$15,000 per worker. Imposing both income and payroll taxes on this amount would
increase the tax burden on millions of middle-income Americans by thousands of
dollars each year.
• Unlike most other tax
expenditures, the health care tax deduction is not skewed in favor of the
wealthiest taxpayers. 70% of the benefit goes to families earning less than
$200,000 per year.
• Congress already rejected
taxing health benefits during the health care debate. Because of the excessive
tax burden on fire fighters and other workers, Congress opted for an alternative
tax on insurance companies to discourage the sale of high cost plans. Congress
shouldn’t try to take a second bite at the apple now in order to reduce the
• Ending the exemption would
undermine health care for over 150 million Americans. Enacted over 50 years ago,
the tax exemption is a major reason why most Americans receive health care
coverage through their employer. Removing the exemption will dismantle this
system and increase health care costs for millions of Americans.
• Employer-sponsored health
insurance is an effective, affordable way to provide health insurance to
millions of Americans. Because of the large size of employer-sponsored plans,
they can provide affordable insurance by pooling the risk to minimize
catastrophic costs. Employer-sponsored plans can also use economies-of-scale to
lower administrative costs and gain better bargaining power when negotiating
with insurance companies.
• The argument that taxing
health benefits will drive down the cost of health care is false. Health care is
not like other commodities. There is no evidence that taxing people on the value
of their insurance plan discourages over-utilization of health services.
Return to Fact