Baucus Reportedly Considering Ways to Tax Health Benefits

June 22, 2009 ( - FOX Business claims to have obtained a five-page presentation, prepared by the chairman of the Senate Finance Committee, Senator Max Baucus (D-Montana), that proposes "options to limit allowable tax free health benefits."

According to FOX Business the document lists four ways to tax benefits starting in 2013, when many reform proposals would take full effect:

  • Tax benefits of single workers who earn more than $100,000 a year and couples that earn more than $200,000. The presentation cites a previous estimate from the Congressional Joint Committee on Taxation (JCT) that the proposal would raise $161.9 billion over 10 years if the changes were effective on January 1, 2010.
  • Tax benefits that exceed a value of $6,182 for a single worker and a value of $15,700 for a worker who also receives coverage for his family. The document cites a previous JCT estimate that the proposal would raise $418 billion over a decade if the changes were effective January 1, 2010.
  • Tax those “base” benefits plus 10%, or a value of $6,800 for an individual worker and a value of $17,240 for families. The higher cap would eliminate taxes for some workers. The document says Baucus has requested an estimate, presumably from the JCT, of how much this proposal would generate in new tax revenue with the change effective January 1, 2013.
  • Tax base benefits plus 20%, or a value of $7,420 for an individual and a value of $18,840 for families, which would shelter even more workers from tax liability. Baucus also has requested, presumably from the JTC, an estimate for this proposal also effective January 1, 2013.

FOX Business said most of the value of amounts cited in the presentation is the cost of insurance premiums that companies pay for their employees’ health benefits, but the presentation says the total value calculated for taxation would also include supplemental health plans for vision and dental care, as well as contributions employees make to their flexible spending accounts and health savings accounts, which workers contribute to with pre-tax dollars. The document says benchmarks would be adjusted annually for inflation, according to the news report.

In a Senate Finance Committee hearing on financing health care reform, Baucus said the tax treatment of health care should be looked at, but said he agreed the tax exclusion for the benefits should not be eliminated altogether (see “Change” May Include Employer-sponsored Programs ). In testimony during the Finance Committee hearing, at least one witness implored the committee to change, but not drop, the employer health coverage tax break (see Change – Don’t Drop – Workplace Health Tax Break ).

While Baucus’ committee has not yet introduced proposed legislation, other Senate democrats have put forth a proposal (see Senate Democrats Make Health Reform Proposal ) that the Congressional Budget Office estimates will increase the nation’s deficit by $1 trillion (see Agencies Estimate Health Reform to Increase Deficit by $1T ).  

Republicans on both sides of Congress have introduced health care reform legislation that they claim promotes universal access to quality, affordable health care without adding billions of dollars in new debt or taxes (see Lawmakers Claim to ‘Equalize Tax Treatment of Health Care’ in New Proposal ).