Lawmakers Debate Taxes to be Levied on Healthcare Benefits

In recent weeks, lawmakers from around the country have been discussing possibilities for healthcare reform and how each individual should be taxed for his or her benefits. The Senate Finance Committee has the goal of reaching a bipartisan agreement on a broad healthcare re-write. However, there has been a great deal of discord amongst Democrats and Republicans, all of whom have varying agendas and viewpoints.

The following suggestions, taken from a recent article in the Wall Street Journal, have been made as potential solutions to the need to fund necessary reforms:

• Impose a dollar cap on the cost of health benefits that may be excluded from taxable income.
• Deny the exclusion to individuals above a certain income threshold.
• Combine the two approaches, by allowing tax-free health benefits to the lowest earners but taxing health benefits above a certain income threshold on a sliding scale that increases as income rises.

Both sides of the political spectrum seem to want one or the other of the first two options. However, a compromise may be the best way to settle all debates. According to the Wall Street Journal article, under the third possibility, "Single workers with income under $62,500 could have all their employer-based health benefits excluded from income tax, while benefits eligible for exclusion could be capped for those with income between $62,500 and $125,000."