Reforming the U.S. Health Care System

Policy Backgrounders | Health

No. 149
Monday, April 26, 1999
by John C. Goodman & Merrill Matthews

III. Tax Fairness

A. Providing, For The First Time, Just As Much Tax Relief To Individuals Who Purchase Their Own Health Insurance As Is Provided TO Employer-Sponsored Plans

  1. Under the current system, employer payments for health insurance are excluded from the employee's taxable income -- cutting the cost of health insurance in half for some middle-income families.
  2. By contrast, individuals who purchase their own health insurance must do so with aftertax dollars -- forcing some people to earn twice as much before taxes in order to purchase the same insurance.
  3. This plan will provide the same tax relief to every taxpayer -- regardless of how the insurance is purchased.

"Low-income families would receive just as much tax relief as high-income families."

B. Providing, For The First Time, Just As Much Tax Relief To Low- And Moderate-Income Families As Is Provided To High-Income Families

  1. Under the current tax exclusion system, those in the highest tax brackets get the most tax subsidy for employer-provided health insurance -- the top 20 percent of families get six times as much help from the federal government as the bottom fifth.
  2. Under this plan, every family will get the same tax relief -- regardless of the family's personal income tax bracket.

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