During the last presidential campaign, Barack Obama railed against Senator John McCain‘s (R-Arizona) proposal to tax all employer-provided health benefits. Obama conveniently omitted the second part of McCain’s plan: a tax credit to subsidize the costs of health insurance. Obama went so far as to repeatedly refer to McCain’s proposal as “the largest middle-class tax increase in history.”
If you thought Obama really was going to change politics in DC, by now you should be returning to reality from your fantasy. Almost predictably and in a hearing that was almost certainly carefully choreographed, Senator Ron Wyden (D-Oregon)—who has legislation pending that includes taxing employer-paid health benefits—asked Obama’s budget director, Peter Orszag, about the issue. Orszag read from the script that the idea “most firmly should remain on the table.” Call it the congressional telegraph; it’s politics as usual. It’s a way for Obama to signal that he supports an idea he actively campaigned against without having to actually say he supports it.
Although I qualify for Medicare, I retain private insurance. When I had to pay my own freight, the first US$20,000 every year went to health insurance, co-pays, and deductibles. It was unsustainable. In August (assuming I don’t get laid off; an extra-large assumption these days) I will have worked for the last three years as an employee at the University of Minnesota at significantly less than market wages. The University pays a sizable chunk of my health insurance. This makes health insurance sustainable for me.
Without knowing what the actual tax bite would be, I can’t say whether or not taxing employer-provided health benefits is a tenable solution. Jackie Calmes and Robert Pear writing for the New York Times report “the Congressional Budget Office says that including health benefits in taxable income could mean $246 billion in additional revenue for a single year.”
Supporters of taxing benefits argue, rightly, that the tax exclusion insulates people from the true costs of health care and favors higher-income individuals and families.
In any case, taxing employee health benefits is certainly a tax increase on the middle class and I’d like to see the tax cuts for the rich eliminated before seeing any increase on middle class taxes, even if it’s only by a day or two. It’s the principle of the thing. You remember that, don’t you, President Obama. It’s what you ran on and why we elected you. In any case, taxed employer-paid health benefits or not—Obama’s healthcare plan (at least the one he campaigned on) is an epic fail. Mandated health insurance is the Massachusetts model which Public Citizen and Physicians for a National Health Program revealed as an abject failure in a study released last month (.pdf; 228Kb). The only civilized option is a single-payer, universal coverage model. Bite the bullet and do it already.
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