It’s true that the value of employer-paid health insurance will be added as an information item on W-2 forms. But contrary to this widely circulating chain e-mail, it definitely will not be considered taxable income.

Readers who followed the 2008 presidential campaign may recall that it was Republican candidate John McCain who proposed to make the value of employer-sponsored health insurance taxable. Democrats hated that idea; Barack Obama ran an ad claiming, falsely, that it would be the “largest middle-class tax increase in history.”

So it is ironic that some of President Obama’s critics now claim that the bill he signed would do what his opponent proposed and he denounced. Ironic, but false.

The e-mail’s author correctly quotes a Congressional Research Service summary of the bill that became law (H.R. 3590), noting that Section 9002 “Requires employers to include in the W-2 form of each employee the aggregate cost of applicable employer-sponsored group health coverage.” But the author then goes on to conclude — quite incorrectly — that this amount will be “added to your gross pay” and that “[y]ou will be taxed on the total.” The CRS did not say that, and neither does the legislation itself. In fact, the value will continue to be untaxed, just as in the past.

The e-mail’s author also claims that an article written by Joan Pryde, a senior editor of the Kiplinger letters, backs up the claim: “Go to Kiplingers and read about 13 tax changes that could affect you. Number 3 is what I just told you about.” But the truth is that the Kiplinger letters actually contradicts the claim.

Pryde’s article is dated April 5 and is headlined “Health Care Reform: Tax Hikes on the Way — Here are 13 changes in the massive overhaul that could impact your tax bill, for better or worse.” Among them:

3. A requirement that businesses include the value of the health care benefits they provide to employees on W-2s, beginning with W-2s for 2011. The amount reported is not considered taxable income.

The author of this false e-mail seems to have missed the second sentence in that paragraph — the part that says the amount “is not considered taxable income.”

–Brooks Jackson
Sources

Pryde, Joan. “Health Care Reform: Tax Hikes on the Way.” Kiplinger letters. 5 Apr 2010.

United States. Cong. Senate. 111th Congress, 2 nd Session. H.R. 3590, “The Patient Protection and Affordable Care Act.” (Enrolled as Agreed to or Passed by Both House and Senate). accessed 26 May 2010.

I hate being taxed. When my son asks for me to buy him a new toy I have to ensure I have enough money. When all of the American’s received a tax cut (Bush’s Tax Cuts) they were not paid for! Furthermore, we went to war that was not paid for. I am not blaming Bush and pardoning Obama, but please Americas please, accept responsibility for yourself and don’t just blame the current Administration.

Angry Single Mom/ Brandon,
Who pays for these illegals going in for the sniffles? Please don’t tell me you believe in these “death panels”. Do some fact checking and you will see that these nations with nation run healthcare are BETTER than USAs. Also why do surgeries cost less outside of America? Google Vacation Surgeries. Another example would be an emergency which you have to take the ambulance…insurance typically doesn’t cover it. Then you are stuck with a $400 + bill. Other nations this is free. What would happen if your house caught on fire, the fire truck came but the house burnt down. Then the fire department sent you a bill for their services.

Profits and life do not mix.

Last request PLEASE fact check anything you hear in the news…

Hmm…take the advice from a Nobel Peace Prize winner in economics, or a economic plan devised over a couple of drinks (trickle down economics)?

IS ANYONE WITH ME?

Albert has, clearly, never had to investigate welfare or anything similar. When my husband got laid off, we tried to see if he could qualify. We quite literally CANNOT afford to have him without it. He has chronic health conditions.

In Seattle, where the average one-bedroom apartment is now hovering at $700 (often more), a couple can make $1400. (In light of the economic downturn, it was increased to $1700ish.) For an individual, it was around $800.

If you earn the minimum wage ($8.55) and work 25 hours a week, you wouldn’t qualify. This is why there are terms like “Working poor.” They make too little to survive, too much to get help.

That said, I think taxed benefits is not a good way to go. I found it quite amusing when everyone was decrying a national plan that would be similar to Medicare. Sure, Medicare has a lot of problems. But here’s the deal: For a relatively modest amount ($90 a month) you’re covered. If you want better care, you can buy a better plan. But everyone will be covered.

The effects of this?

Employers will have more money to hire employees (or at least not fire any)

The government won’t be spending money helping hospitals that deal with poor who can’t pay. (Both as charity and as non-payment.)

People will see doctors more readily, which means fewer big medical bills. (People routinely die of things like staph infections. Others wait until they’re so sick, the bill is HUGE and they can’t pay.)

Again, hospitals won’t have to cover so much of these bills.

A healthier America, which includes better ability to work (thereby paying taxes) and fewer preventable illnesses, such as diabetes 2.

But I think it could have a huge impact on this economy. Employers have more money to keep employees/give raises. More jobs/more money equals more taxes.

And incidentally, self-employed people DO get a tax break for paying their health plans. It’s not big enough, in my humble opinion. But it’s there.

Oh and by the way, my husband’s insurance through the Washington State Insurance Pool (thanks to repeated MRSA infections, he was rejected by insurance companies) is $502 a month. We earn just under $3300 a month. So with our rent and his insurance, more than one-third of our income is gone.

Finally, I think we should subsidize medical school educations, which would enable doctors to charge less. And, if everyone were covered, the medical costs that did still trickle down would be significantly smaller.

the less amount of people who are ill will just make us a stronger country.

think about if you have kids…people who don’t have health coverage send their kids to school sick, and they get every other kid sick, and well, that costs you sick days staying home with the kids.

think about grocery stores and where you eat…you think all of those people working there have coverage behind the scenes…i bet their illnesses travel with the food you consume.

and as for medicare/aid…that would be a solid system if it did not continue to get pillaged along with social security by our greedy govt on both sides of the isle to pay for their pet projects.

i believe in more regulation, instead of less…less leads to corruption, and just more costs out of our pocketbooks.

I understand that we don’t want government take over of healthcare – that is NOT even on the table. What we’re likely going to get is a mandate that everyone has to have coverage and then subsidies provided to the middle class people who make too much to qualify for medicaid, but too little to be able to afford $10-12k a year for family coverage.

Find me a family in the $40-50k a year range that has $12k free in their budget. Even if they have no consumer debt and cancel their cell phones, cable tv, run the heat at 60 degrees all winter, there’s no way they can afford it.

We do have to tackle the cost aspect of insurance. Someone tell me why an MRI in Japan costs $100 and here it costs $1000. There is no insurance solution that’s going to work without a cost containment solution. Insurance costs are up 117% in the last decade and are expected to continue on this steep trajectory as far into the future as can reliably be predicted. That has to stop, and I don’t mean rationing. I mean recovering excess costs that medicaid pays out to private insurers (it’s corporate welfare pure and simple). It means taking a look at executive pay – why should Bill McGuire make 430x the average income for running a medical insurance company?! He resigned 2 years ago over a stock scandal and got a $1.1 Billion golden parachute. 1 in every 700 spent on healthcare went to him in 2005! Think about that for a minute.

#1…

utility de-regulation has been a nightmare.

now imagine if health care coverage did the same thing…so say you buy package a….which doesn’t include xyz….but then something bad happens, and your spouse needs xyz….can you imagine the out of pocket….not a good idea.