Health Care Tax

In a 5/19/09 WSJ article, Janet Adamy reviewed various schemes that the Senate Finance Committee is considering to pay for changes to the health care system.

In 2008, the “government gave up $194.2B in revenue due to health care tax breaks.” This tax subsidy was the largest single group of subsidies, 8% of total government revenues of $2.5T. Companies can deduct health insurance premiums for their employees and, in many cases, employees pay their share of the premiums in after-tax dollars. Max Baucus, Committee chairman, said repeal of the exclusion is not being considered.

Several proposals, however, aim to eat away at the exclusion. One proposal eliminates tax breaks for the cost of health plans above a certain value, with the health plan for federal employees serving as a benchmark. A second proposal cuts tax breaks for high income earners making more than $200K, if single, and $400K, for couples. A third proposal is a combination of the first two. Other proposals being considered are various taxes which would promote a healthier lifestyle, including higher alcohol taxes and a new tax on drinks with sugar.

The cost of the rebuilding the health care system has been estimated at $1.2T over ten years. The money has to come from somewhere.

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