By Ken Allen and Tom Chamberlain of Portland, Oregon. Ken is the executive director of Oregon AFSCME and Tom is the president of the Oregon AFL-CIO.
It’s hard to open the paper without reading a story about health care reform – why we need it, what it should look like, how we should pay for it…
One issue that we thought was laid to rest with the election of President Obama seems to be back on the table. During the campaign Senator John McCain suggested that health benefits should be taxed. He proposed considering health benefits that are paid for by your employer “income.” President Obama opposed this, and middle class Americans worked hard to make sure that we didn’t end up with our hard-earned benefits on the table for taxing.
Why shouldn’t health benefits be taxed?
Companies offer workers health benefits to supplement pay, to attract the best employees, and to ensure that workers are able to stay healthy so that they can continue to be productive at work.
Taxing health benefits discourages employers from offering benefits to their employees, and in the current system it would unfairly discriminate against small businesses, and people in workplaces with more women and older workers. Health insurance for older people and for women tends to be higher than insurance for young men. These workers will pay more in taxes. Similarly, small businesses that can’t get large-pool rates on their health insurance usually pay more per person than large corporations. Oregon’s economy is built on small businesses. If you work for a small business you will pay more than your neighbor who works at a large company.
Even worse, this tax targets middle-class Americans. The wealthy can lower their tax burden through credits and deductions. The poor pay minimal taxes. But middle-income Americans who are already struggling to pay their health care costs will get slapped with the full cost of a health insurance tax.
Health coverage through the workplace, which over 60% of Americans under 65 take advantage of, evolved in part because changes to the tax code made these benefits tax-free. Removing this incentive will inevitably lead to fewer companies covering health care costs, and throw more Americans into the expensive individual market for health insurance, or worse leave them without insurance at all.
Why is this plan resurfacing?
Senator Wyden’s S. 391 will take a big step toward reforming our health care system by supporting public health care options at the state level, establishing standard guidelines for health coverage, and encouraging the establishment of school-based health centers, Chronic Care Education Centers and other centers that promote the maintenance of health. But buried within the reform, Senator Wyden’s bill calls for taxation of all employer-covered health care benefits. And, Senator Wyden is working hard to have similar language put in a larger health reform bill that is being drafted in Washington, D.C., now.
Health care funding must be reformed to help more Americans gain health care coverage. The current funding system clearly doesn’t work. But taxing health care benefits is a big step backwards. It discourages companies from offering health care, punishes people for their age and gender, and makes health care less affordable for the 60% of Americans 65 or younger who have health insurance through their job and will have to pay taxes on those benefits.
Senator Wyden has been a champion of health care reform, and his work to reform the system and to encourage public options for health care coverage could change the face of our health care system, expand coverage, and make health more affordable for all Americans. But only if our Senior Senator stops lobbying for a health care benefits tax.
Let’s get health care consumers and purchasers together with legislators to come up with a real fix to fund health care – something that encourages coverage, lowers costs, and doesn’t punish middle class Americans.