WTW? Obamacare repeal GOP looks at making employer health benefits into taxable income

[mfcorey1]

When you dig into the details of GOP legislative plans in the Congress to repeal the Obama health law and replace that system with something different, it doesn’t take long to find items deep in the fine print that could certainly ignite some controversy over how best to deal with health insurance coverage in the future.


For example, if you get health care coverage through your job – that is the most common coverage for American workers – should those employer provided health benefits be taxed by Uncle Sam?

Currently, the money that a business spends to provide an individual employee with health benefits is not treated as income for that worker – so your benefits are not taxed – but some Republican plans would change that in the future.


The “Better Way” plan from House Speaker Paul Ryan argues for such a change, making the case that the tax exclusion for employer provided health benefits causes an economic reaction which forces up the cost of health insurance premiums (it’s on page 15 of that link).

A rather large amount of money is on the table on this issue; a recent report estimated that Uncle Sam is missing out on $266 billion in tax revenues in 2016, and would total $3.6 trillion over the next decade.

“This benefit is so massive that, in terms of federal support, it would be the third largest health expenditure, after Medicare and Medicaid,” the Speaker’s ‘Better Way’ plan states.

While the Speaker’s approach on health care reform has not made it into legislative language as yet, one GOP plan issued in the first week of the new Congress would end that tax exclusion for employer provided health care benefits.

The bill is from the the Republican Study Committee in the House; the group’s plan would take on the current system by settting up a standard deduction for health insurance (SDHI) of $7,500 for individuals, or $20,500 for a family.


The idea is simple – the deduction shields more of your income from taxes, lowering your net tax liability, and allowing you to have extra money to pay for health insurance coverage, either through a plan you buy directly, or health coverage through your job.

http://jamiedupree.blog.ajc.com/2017/01/08/obamacare-repeal-gop-looks-at-making-employer-health-benefits-into-taxable-income/

[pnwmom]

1. Yup, they want to hurt ALL workers, even the ones with employer insurance. n/t

[get the red out]

2. Against taxes my ass

They somehow convince middle class people that they will lower their taxes. Yea, right!

[Hoyt]

3. It looks like they are proposing a standard deduction for health insurance of $7500, so not as bad

as title makes it look. Plus, if any additional tax revenues went toward something like ACA, I'm not totally opposed at this point.

[Ilsa]

6. For a good family plan, it probably runs over $15k a year.

So half of the benefit gets taxed. At 15%, that's over $1,100 more in taxes.

Okay, so it's 20,500 for family plans. Still, the concept is ridiculous.

[Hoyt]

12. Why is it ridiculous? First off, you'd get a standard deduction of $20,500 vs. the $15K you

estimated it costs. I'm fine with removing health care from employment as much as possible, and the tax benefits aspect is part of that. Even Sanders has promoted that.

[Ilsa]

14. I don't mind removing hc from employment, but ryan is

Looking for another way for the working middle class to shoulder another portion of the budget deficit problem. I doubt reducing middle class disposable income will help the economy.

[Hoyt]

15. Actually, I think they are trying to help those who don't get Hinsurance through their employers and

trying to encourage people who can afford better health coverage from getting it at taxpayer expense. I understand doubting these GOPer cheats, but one of things Sanders and others have opposed are the so-called Cadillac plans that go untaxed. If you get a $7500 standard deduction, you are less likely to buy/want a plan that is going to get taxed on anything above $7500. Not sure $7500 is the proper level. But, I do get suspecting anything Ryan proposes.

Read the section Further Explanation in the box in the article.

[Hortensis]

19. Well, there's a lot to wait for and have analysis of, but

Last edited Mon Jan 9, 2017, 03:24 PM - Edit history (1)

I do note that taxing workplace healthcare benefits would mean a massive shift of tax burden to employee. Now, yes, that burden might be offset in some way--certainly in the beginning to avoid riots--but would those offsets be assiduously increased as factors changed, with inflation for instance, medical cost inflation being a constant, huge reality? Actually, a ridiculous idea.

Would I be overly suspicious if I worried that this kind of Congress would quietly do other tinkerings, or fail to make other adjustments as needed, to whatever mechanism was supposed to make up for this huge shift in official tax liability? To offset the offset?

We need to keep in mind that economic libertarians, the real thing or just opportunistic, feel wages should be set entirely by "the market," including during depressions and potato famines. They not coincidentally are also in favor of limiting labor power through collective bargaining. And, yes, they also strongly believe that every person should be free and independent, meaning pay entirely for his own healthcare--or not, depending on ability and will.

People should believe the extremists who've been moved into government, and those doing the movement, when they say they intend to dismantle government programs that require people to pay into common funds. They do. Some are just wealthy people who want to stop paying taxes to support inferior people they despise. (Us.)

True libertarians, like Ryan probably, tend to stay away from details in public, but they see a healthy nation as one that is not aging and is much medically healthier than this one, one where people live (or not) standing on their own feet and according to their own abilities. They see a social safety net that keeps people who once owned their own homes from living under shrubs as a recipe for a sick nation. They are revolted by the vast and growing population of retired ex-workers who can't afford to pay for medical care and want others to pay for it for them. It doesn't how many years those people paid in, they've outlived their independence and dignity.

They have a real point, perhaps 13% of all Americans, but I'm not willing to give up playing with our grandchildren's children some day just to suit the callous, selfish fancies of people psychologists say are motivated by self interest that takes no account of others and who have a literal inability to feel the kind of altruism that causes most of us to feel good about paying into common funds that help secure long, decent lives for most.

[SickOfTheOnePct]

21. Yep

I would guess that for most people who get health insurance through their employers, this would be a tax cut. As a federal employee with a very good health insurance plan, it would certainly be a cut for me.

[Lee-Lee]

4. The ACA was set to start taxing some plans next year

It was labeled the "Cadillac Plan" tax but it covered a lot the the good plans that were fought for and won by unions where the plan would be taxed.

It was set to tax any plan over 10,500 at 40%.

[Ilsa]

8. I wouldn't call our plan "cadillac" and it costs

More than that. Even at $15k for a family, we have high deductibles.

And would the cut off amounts get raised with their inflation annually?

[LynnTTT]

11. Not accurate

Actually the threshold is $ 27,500 for family plans so not too many people are going to be affected. The $ 10,200 limit is for single people.
And remember, the additional tax applies only to the premium above that threshold.

[KewlKat]

5. Show me the Con's taxes and we'll talk.......otherwise if he doesn't even have to

pay taxes, why the hell should they tax me on my health benefits paid by my employer? How many years has this orange excrement escaped paying his fair share or any share for that matter?

and on another note, if he can VIOLATE ethic rules/laws, why as a CS do I have to abide?

[ProfessorGAC]

7. A Big Why?

Why would premiums go up because the cost is not taxed? If they tax it, the insurance companies will charge less? That makes no sense whatsoever. There is zero microeonomic logic to that notion.

And, then with the tax exemption, doesn't that put it in the same place, from a cost perspective?

Lastly, if people don't get this deduction until tax time, doesn't that mean they're using post tax dollars to pay for health coverage, then getting a "rebate" once a year? And, it that's the case, doesn't that take those post tax dollars (or at least the delta) out of the overall economy, making consumption go down as people are spending more post tax dollars for the same services?

This has the smell of someone who thinks randian economics make sense. BTW: They don't

[patricia92243]

9. I thought employers could count off on their taxes any employee benefits????

[Ilsa]

10. Yes, that expense is a huge deduction.

Which is why the companies' expenses would appear as income to the recipients in the gop way of looking at things.

[Autumn]

13. Employers will still be able to deduct payments for employees insurance as a business deduction.

It will be taxed as income on the employee end.

[haele]

16. Which means, with a standard deductions only tax policy the working stiff will be stiffed again.

Healthy families will get hit twice as hard and families with a member that has a chronic disability that offsets the "income" the benefit of employer-provided health care has become. And if they get rid of any health expense tax deductibles - because the "new" family health care approved medical costs annual deductible is sooo affordable at $13K or whatever they set it at, any family that makes under $60K might as well declare bankruptcy as soon a kid breaks their arm/leg doing normal kid stuff, let alone have someone develop a chronic condition.
$20K "annual standard tax deduction" won't work out for a family, especially if the employer is providing insurance where they're either paying the premiums (Cadillac) or they're even sharing premiums at 50/50. With Ryan's new "Tax Plan" which "closes loopholes" and simplifies the tax code, that means that the average W-2 will show the worker supposedly "took home" close to $15K more taxable income from the employer's portion of the premium than they actually saw in their pockets.
For a worker in a household making above the median income - $52K - $70K a year, the most the majority of the citizens in this country can expect to make in their lifetime, that will mean that the average family is actually going to have to pay more in federal taxes than the proposed GOP increase in the standard deduction will have supposedly saved them.
Add a reduction or even elimination for the mortgage deduction, and it will be even worse for anyone that doesn't have wages at a level that allows them the ability to bank more than a third of their monthly income after dedicated expenses (i.e., housing, medical, transportation, food, contractual debt).

There's no hiding any penny from the GOP tax man if you aren't wealthy enough to hire a mob accountant and stash money overseas or in complicated capital gains and losses formulas.

What GOP voters that aren't in the top 1% don't realize is that the GOP Kleptocracy honestly believes that if you as an individual in the United States don't have enough money to "buy" citizenship, you really don't have any rights to any services or protection in this country. It's the Randian philosophy married to the "exceptionally" American breed of Evangelical Calvinism.

In effect, anyone who can't buy their rights and services is disposable. If you've become seriously sick or injured and don't have the funds to cover your care - the Randian philosophy is that you just disappear from the system. You're no longer productive. Your kids - heck, there's tons of kids out there to take your kid's place; if you can't afford tutors to get into the Ivy's, if you can't save to pay your kid's way to college - your kid isn't that important in the scheme of things. And since Abortion is illegal, you can always have another one if this one doesn't work out properly.
- in case someone doesn't get this.

If you lose your job and can't immediately find another one or afford to retire and pay for all future health care and housing issues, oh well - the Calvinist philosophy is that you're being punished for your sins, so accept your punishment from their merciful God and suffer for the rest of hopefully short one surviving in a hidden tent by the side of some road near an industrial park.

We aren't in this together any more. It's one tribe against the others, and the 1% tribe has access to all the resources and can make the rules to ensure they stay on top.

Haele

[Autumn]

18. Once again the lower and middle class pays for the wealthy. That's the GOP mantra

[treestar]

17. I am self employed and there was a tax credit

for the money spent on insurance premiums, so wouldn't that apply to the employed anyway?

I am always in favor of decoupling health insurance from employment, so people have an idea how much they are really paying.

[haele]

20. Not the employer part, only the part they paid.

Like most employees, I've been getting a medical tax credit since I started getting pre-tax benefits from work; the FSA, HSA, and premium payments were pre-tax. I know what I had been paying as a premium, because it always showed up on my W-2. Whatever my employer paid was not included, because typically, I'd end up paying more for health care between my premiums and deductibles than my employer did - because my employer was able to negotiate rates and services to lower than market average due to volume of people under the plan.
I've worked for mid-sized to large sized companies since I left active duty, and I've looked for insurance on my own as recently as 2014.
Between my portion of the premiums and that paid by both my current company and my former company, rate for insurance was 20 - 40% lower than what could be found on the market as an individual in terms of both rates and services provided.

If I were to buy my own insurance for myself, my disabled spouse, and my two unemployed dependents right now under the PPACA rules and try to get the same medical services and benefits currently provided by my employer's negotiated plan, it would cost me between $3K and $3500 a month. Our household, between me and my husband's SSDI, make just too much to qualify for subsidies.

I couldn't do it, even if my employer gave me the $2800 a month they pay their insurance company to cover me. I'd have to divorce my spouse so I could buy a $900 to $1500 a month policy for me and the dependents, and he can be covered under Medicare. I'd still have foot the smaller premium difference out of the household budget, and still be on the hook for $13500 in deductibles - or whatever I can swing to lower my premium to an affordable rate.

The tax credit is only good at the end of the year. During the year - it does me very little good at all, even if I play with exemptions and can estimate my tax deductions and taxable income accurately enough to give me the least amount of tax liability or return possible for the next year.

Haele