HealthTree Blog

Fox News reported today that 1 in 8 U.S. workers could be subject to taxes on their health benefits if the Senate’s latest health plan proposal goes through untouched. The entire presentation of the plan, as provided by chairman of the Senate Finance Committee, Sen. Max Baucus, can be seen here.

Health plan benefits have been an effective way for employers to get and retain employees for over 60 years. An estimated 150 million people either directly receive healthcare benefits from employers or depend on those that do. Under this proposal, employers would have the option to limit tax-free benefits for some items.

The proposal contains four different scenarios for taxing benefits, including healthcare and flexible spending accounts:

• Single workers who earn more than $100,000 a year and couples that earn more than $200,000.
• Benefits that exceed a value of $6,182 for singles and $15,700 workers who also receive family coverage.
• “Base” benefits plus 10%, or a value of $6,800 for individuals and $17,240 for families (the higher cap of this option eliminates taxes for some).
• “Base” benefits plus 20%, or a value of $7,420 for individuals and $18,840 for families (this option would shelter even more workers from tax liability).

The potential impact is based on a survey conducted by the National Opinion Research Center, for the Kaiser Family Foundation and the Health Research and Education Trust.

The taxes would be expected to help support the ever-growing cost of healthcare. Last week, guest host Alison Stewart spoke with NPR Senior Washington Editor Ron Elving about Congress’s “sticker shock” relative to sizing up these costs and looking for revenue to pay for them. The clip, though brief, talks about how these costs can be covered (outside of adding it to the national debt), and gives some other ideas for covering these costs including taxes on:

• high-income individuals (carried out as a cap on itemized deductions)
• raising payroll tax on medicare
• instituting higher taxes on items with health consequences (i.e., alcohol, tobacco, unhealthy foods/drinks, etc)
• value-added taxes on certain goods

In this clip, Elving commented that talk of taxing employee benefits doesn’t have a lot of traction in the House yet, so these other areas may be more likely in the end.

What do you think?

Photo Credit: http://www.flickr.com/photos/calliope/2989567835/