What’s the biggest middle class tax break?

Hint: Medicare For All would eliminate it and nobody seems to be talking about it.

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Anybody remember the Simpson-Bowles Report?

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It was commissioned by President Obama shortly after he was first elected … reported out in 2010 …  and trash-canned shortly thereafter … since it predictably recommended spending cuts and  tax increases.

According to Simpson-Bowles, the “biggest“Federal tax break” is ….

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Answer:

The tax-free status of employer-paid health insurance.

Generally, the Medicare For All programs that Dem presidential candidates are proposing eliminate employer-sponsored healthcare insurance … either immediately or on phased-in.

Here’s the rub: The money that employers pay towards employees’ health insurance is form of compensation that isn’t isn’t taxed.

In rough  numbers, the total premium for a family’s health insurance is about $15,000.

If you want to know your specific numbers, just look at box 12 of your last W-2.  The total amount paid for your health insurance (by both you & your employer) is reported as the disguising code “DD”.

You’ have to go back to your paystubs to determine how much of that amount you paid as a paycheck deduction.  The difference is the amount your employer paid.

These days, employers typically pay about 65% of the the health insurance premiums … or about $10,000 per family.

Again, under MFA, employer-sponsored plans go away.  So, would the tax-free employer subsides.

Think about that for a moment.

It wouldn’t surprise me if employers (you know, those evil corporations) get on the MFA bandwagon … probably behind the scenes.

Why not?

It would eliminate one of the company’s biggest (and least controllable) expense items.

Many economists would argue that theoretically, since the $10,000 insurance subsidy is a form of compensation, that employers would pass some (or all) of the savings back to employees as cash compensation.

While I’d bet the under on that one, let’s pretend that they do.

What’s the impact on employees?

Well, $10,000 of tax-free compensation gets converted to $10,000 of taxed compensation.

For middle-class folks, that means about $2,000 to $2,500 in additional income taxes.

Hmmm.

Presto: the “biggest Federal tax break’ is gone … and, nobody is talking about it.

Double hmm….

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