OCTOBER 6, 2021 9:11AM
New Cato/YouGov Survey on Health Savings Accounts
By Michael F. Cannon
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Many call the “tax exclusion” for employer‐paid health insurance premiums a tax “break.” In fact, it denies workers control over an enormous share of their earnings. It coerces workers into letting employers control roughly $1 trillion of their earnings each year as well as their health insurance. Along the way, it leaves workers vulnerable to losing coverage when they change jobs, divorce, or retire.
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Thanks to the market distortion introduced by FDR’s WW2 wage and price controls, “benefits” for employees were a way that employers could “pay” employees more without running afoul of the “law”.
Back in the Seventies, leave at night in an AT&T datacenter watching accounting programs run, a wise old AT&T Treasury executive opened my eyes to how unfair that “benefits” were to me. I didn’t realize that the “benefits” were more valuable to AT&T than to me. Every benefits “expense” was a tax deduction to AT&T. As well, all those “expenses” were added into the “rate base” used in front of the FCC and various PUCs to justify higher regulated rates. The old exec pointed out that I was “paying” for the benefits in salary reductions. And, the wicked kicker was that if I left my “servitude” I’d lose most and in some cases all of those “benefits”. Argh!
Now decades later, the USA has evolved to realize that while you don’t lose your car insurance if you change jobs, you do lose your “health insurance”. (Don’t make me laugh about COBRA; who can afford those rates?)
OK, so you decide to get your own “health insurance”, and you find that expense is not tax deductible to you as an employee that has “benefits” with your master. I meant employer.
If you have a niche that permits you, then you can become a “corporation” and the premiums for all your employees is deductible. Just don’t have any other “employees” and you have found a loophole. Of course, there are setup and ongoing expense to “being a corporation” but it’s no where near as much as you think.
Bottom line: The tax code needs to change to allow you to deduct your private health care insurance. What’s good for the employer should be good for the worker!