Employer Tax Exclusion

  • See Employer Tax Exclusion under Health-Related Tax Policy, for a discussion of current federal and state policies related to the employer tax exclusion and the annual tax expenditures associated with these.
  • Jason Furman. Health Reform Through Tax Reform: A Primer.
    Health Affairs, May/June 2008; 27(3): 622-632. [Abstract] This paper surveys a range of proposals to reform health care, either by adding new tax incentivesor by limiting or replacing the existing tax incentives. Replacing the current tax preference for insurance with an income-related,refundable tax credit has the potential to expand coverage and reduce inefficient spending at no net federal cost. But suchan approach by itself would entail substantial risks, so complementary reforms to the insurance market are essential to ensure success.
  • Tax Exclusion (Health Affairs search)
  • Edmund F. Haislmaier. Kerry’s Excise Tax on “Gold-Plated” Health Insurance Policies. Heritage Foundation WebMemo #2578, August 5, 2009. [Full Text (html)]
  • Joe Antos. Obama Targets Wrong Tax for Health Reform, May 30, 2009. [Full Text (html)]
  • Lisa Clemans-Cope, Stephen Zuckerman and Roberton WilliamsChanges to the Tax Exclusion of Employer-Sponsored Health Insurance Premiums: A Potential Source of Financing for Health Reform (Urban Institute, June 2009). In this paper, we discuss the revenue and distributional consequences of several policy options that would alter the ESI tax exclusion. We focus on two specific policy design elements: (1) a cap, or dollar limit, on the amount of employer-sponsored health insurance premiums excluded from taxable income; and (2) an index that determines how this cap might grow over time. We present first year (2010) and 10-year (2010-2019) revenue estimates for all options and distributional impacts in 2019 for selected options. The distributional impacts include income and payroll taxes even though payroll tax revenue would not be available to fund health reform, because any decreases in benefits resulting from the tax changes would eventually return to workers as higher wages that would be subject to both types of taxes.
  • Office of Management and BudgetTable 17-1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2011-2017. In 2013, total federal revenue losses
    • Line item 132 lists federal income tax revenue losses related to the exclusion of employer contributions for medical insurance premiums and medical care. Footnote 16 provides the corresponding revenue losses related to FICA payroll taxes. In 2013, income tax losses were $180.58 billion, while payroll tax losses were $113.69 billion.
    • Line item 133 lists federal income tax revenue losses related to the deduction for self-employed medical insurance premiums; footnote 17 reports that self-employed health insurance premiums were excludable from payroll taxes only in 2010. In 2013, income tax losses were $5.97 billion.
  • Thomas M. Selden and Bradley M. Gray. Tax Subsidies For Employment-Related Health Insurance: Estimates For 2006Health Affairs. November 2006. Shows that tax subsidy–inclusive of federal and state income taxes and Medicare/Social Security payroll taxes, amounted to 35.4% of premiums in 2006. The revenue losses from state income taxes ($23.4 billion) amounted to 20.9% of the estimated revenue losses from federal income taxes ($111.9 billion).
  • L. Batchelder, F. Goldberg, and P. Orszag, “Efficiency and Tax Incentives: The Case for Refundable Tax Credits,” Stanford Law Review 59, no. 23 (2006): 23–76.

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