Health Insurance Tax?

Health care reform is a high priority for the Obama administration. Many Americans cannot afford to pay for private health insurance, and major reform is needed to make coverage affordable for lower-income people. An important question, though, is how to pay for it - making health coverage available to nearly 50 million uninsured Americans is bound to be costly. One method advocated by some (though not by President Obama) is to allow the most expensive employer-supplied health benefits to be taxed as income.

Proponents of the idea argue that it would be an important source of the revenue necessary to pay for health care reform. One Congressional estimate puts the revenue that could come from the tax at $100 billion over five years, according to an article in the New York Times. A problem with the tax would be the difficulty in writing the legislation. It would have to be written carefully to avoid taxing lower-quality coverage that is expensive because of other factors (such as location or the size of the company paying the benefits) along with expensive, high-quality plans. Also, some analysts point out that if the group of taxable plans is too narrowly defined, the revenue gained will not be significant enough to warrant the action in the first place.

Even though the money for reform must come from somewhere, a tax on health insurance is not a good way to get it. Just because some employees' health benefits are expensive does not necessarily mean that they have income to spare. They must still pay costs associated with health insurance, and whatever the quality of their coverage they may still have difficulty paying their part. Taxing health benefits as income would put an undue burden on citizens struggling to get by.