Bush Budget Includes Employer Health Coverage Tax Changes

February 6, 2007 (PLANSPONSOR.com) - President Bush's latest budget proposal includes an end to the tax-exempt status of employer-provided health insurance payments.

As part of a complex White House plan to build up coverage for the uninsured, the plan would give families a $15,000 deduction for buying medical coverage with any employer contribution above that considered taxable income, according to an Associated Press report.

Also, se tting aside money in a Flexible Spending Account (FSA) would end under Bush’s proposal, even though taxpayers would still be able to save tax free for a dependent’s medical expenses.

The proposals are part of a tax package that includes $1.9 trillion in reductions over the next 10 years. The lion’s share of the president’s proposed tax cuts would come from making permanent his signature cuts enacted in 2001 and 2003, according to the Associated Press.

Democrats have assailed the proposal as an inadequate solution to covering the uninsured, noting that it could penalize some workers who receive generous employer-furnished health coverage.

Bush’s budget said it would “level the playing field for Americans who purchase health care individually rather than through their employers.”