Tax Breakup: Conservative Think-Tankers Face an Unexpected Opponent: Employers

Dreyfuss, Barbara T., The American Prospect

EMPLOYERS FACE NEW OPPOSITION in their efforts to rein in healthcare spending, and it's not coming from the employees whom they are forcing to foot more of the bill. Instead, employers are at odds with their allies in the conservative think-tank world, who are mounting an all-out offensive to unravel the employer-based insurance system, which covers nearly 60 percent of Americans, by proposing to tax that benefit.

The rift between the conservatives and the employers surfaced recently after a report by a bipartisan advisory commission of academics, Wall Street insiders, and former members of Congress appointed by George W. Bush to recommend tax reforms. In November, that panel, after heavy lobbying by a coalition of right-wing activists, suggested that workers' health benefits be counted as income and proposed to cap the amount of insurance that could be offered tax-free.

The tax exclusion dates to an IRS ruling in 1943 that employees did not have to pay income taxes on the value of health benefits offered by employers. The decision sparked the growth of employer-provided benefits because it gave companies a way to attract scarce workers during the war when their options were limited by government wage controls. Today it is the backbone of employer-provided health benefits. The tax exemption of health benefits saved Americans $122 billion in taxes in 2004, consultants at the Lewin Group estimate; the average family saved $1,482.

The panel's recommendation was modest in scope. But even so, it …

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Publication information: Article title: Tax Breakup: Conservative Think-Tankers Face an Unexpected Opponent: Employers. Contributors: Dreyfuss, Barbara T. - Author. Magazine title: The American Prospect. Volume: 17. Issue: 1 Publication date: January 2006. Page number: 20+. © 1999 The American Prospect, Inc. COPYRIGHT 2006 Gale Group.

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