Today, when a company pays for an employee's health insurance premiums, that money is not subjected to federal, state, or local income taxes, or to payroll (FICA) taxes. It is as if it is a "tax free" part of a salary. Individuals can deduct their health insurance and any health care expenses that are more than 7.5 % of their income, but that is not nearly as "tax-friendly" as the benefits that employees receive when they get their insurance on the job.
Many proponents of health care reform believe that it is important to change the tax law and to offer a standard deduction for each individual who purchases health insurance. The effect of such reform is expected to be two-fold. First, it should encourage more individuals to buy health insurance because they will be getting a tax break by doing so. Second, those individuals will be rewarded for spending wisely. If everyone gets a standard deduction, those who spend less on health insurance will save the most money.
Featured Podcast
Current State and Prospects for Consumer Directed Health Care Kim D. Slocum, President of KDS Consulting speaks with Malorye Allison, editor-in-chief of ReformPlans.com.
