President Bush’s Tax Code Panel Proposes Cap on Health Insurance Deductions
The President's Advisory Panel on Federal Tax Reform on Tuesday agreed that proposed revisions to the federal income tax code should include caps on employer-sponsored health insurance and mortgage tax deductions, the Washington Post reports. President Bush in January established the nine-member, bipartisan panel to consider "large-scale alternatives" to the current tax code, according to the Post (Birnbaum, Washington Post, 10/12). Under the current tax code, employers can take a deduction for health insurance provided to employees, and workers pay no tax on the value of the coverage.
However, some experts have said that those provisions benefit higher-income employees at the expense of others and contributes to the number of uninsured, the AP/Arizona Republic reports (Dalrymple, AP/Arizona Republic, 10/12). In fiscal year 2005, the exclusion of contributions for health insurance premiums and medical care from employee income cost the U.S. treasury $112 billion in revenue, according to the Office of Management and Budget.
Panel member Timothy Muris, a professor at the George Mason School of Law and a former head of the Federal Trade Commission, said that the federal government should cap employer-sponsored health insurance tax deductions at $11,000 annually for family coverage (Guy Matthews, Wall Street Journal, 10/12). Panel members could not agree on whether the proposed cap should apply to employers or employees (AP/Arizona Republic, 10/12). The cap likely would affect only the most comprehensive employer-sponsored health plans. A September survey conducted by the Kaiser Family Foundation found that the average annual premium for family coverage was $10,800.
According to the Wall Street Journal, the recommendation of a cap on employer-sponsored health insurance tax deductions likely will "meet strong opposition from taxpayers and lawmakers," with U.S. residents "already ... worried about escalating health care costs" (Wall Street Journal, 10/12). In addition, the health insurance industry "consistently" has lobbied against caps on employer-sponsored health insurance tax deductions, USA Today reports.
Former Sen. John Breaux (D-La.), vice chair of the panel, said, "We've got to make bold recommendations without regard to the politics of them. The politics will be debated for a long time" (Wolf, USA Today, 10/12). Former Sen. Connie Mack (R-Fla.), chair of the panel, said, "Clearly, under present law, the higher-income folks benefit the most from those two aspects of the tax code" (AP/Arizona Republic, 10/12). The panel plans to make final recommendations to the Treasury Department by Nov. 1, but Congress likely will not address them before next year (USA Today, 10/12).