2011 Fire Fighters Issues Book.pmd - IAFF

IAFF LEGISLATIVE FACT SHEET
TAX EXEMPTION FOR EMPLOYER-PROVIDED
HEALTH CARE
BACKGROUND
The IAFF opposes the taxation of employer-provided health benefits.
Health care benefits provided by employers to their employees are not currently counted as taxable income. Similarly,
employee contributions toward their health care premiums are made on a pre-tax basis. As the federal budget deficit
continues to grow, policy makers are considering all options for increasing revenue, including ending the current tax
exemption for employer-provided health benefits.
The amount generated by ending the tax exclusion for employer-provided health benefits is significant. In 2009, the
bipartisan Joint Committee on Taxation estimated that capping the exclusion to half of the total premium amount would net
$1.173 trillion over ten years. As a result, the National Commission on Fiscal Responsibility and Reform, a bipartisan
commission charged with finding ways to reduce the deficit, recently proposed the gradual elimination of the tax exclusion
for employer-provided health care. Another debt commission, created by the Bipartisan Policy Center, also recommended
phasing out the tax exclusion in its report, “Restoring America’s Future.” Finally, the Chairman of the House Budget
Committee, Representative Paul Ryan (R-WI), proposed in his “Roadmap for America’s Future” replacing the tax exemption
with a tax credit that would put affordable health care out of reach for many Americans.
Taxing health benefits would particularly hurt fire fighters. For years, fire fighters have accepted lower wages in exchange
for better health coverage. Fire fighters also face higher insurance premiums due to the risks posed by their profession.
That’s why fire fighter health plans often exceed $20,000 a year. Removing the exemption would add thousands of dollars
in additional taxes even though fire fighters earn middle-class salaries.
Congress previously rejected taxing health benefits during the health care debate. Because of the excessive tax burden on
fire fighters and other workers, Congress opted for an alternative tax on insurance companies to discourage the sale of high
cost plans. No tax on health benefits was included in the final health care law.
Eliminating the tax exemption is now back under consideration as a way to reduce the federal deficit even though it still
remains unwise economic policy. Removing the exemption will raise taxes on those least able to afford it. Many fire
fighters have had their wages frozen or cut during these bad economic times. And it could undermine a fragile economic
recovery. Many economists have already noted that raising taxes now could increase the chances of a double-dip recession.
Taxing health benefits will also undermine an integral component of our health care system. Enacted into law over 50
years ago, the tax exemption is a major reason why most Americans receive health care coverage through their employer.
Ending the exemption would undermine a system that provides affordable health care to over 157 million Americans.
CONGRESSIONAL ACTION
Senators Mark Warner (D-VA) and Saxby Chambliss (R-GA) are preparing to introduce legislation that will implement the
recommendations of the Deficit Commission. Specific details of the Warner-Chambliss legislation are still being developed
at this time. In addition, the leaders of both the House and Senate, as well as the Obama Administration, have expressed
support for examining various tax exemptions as a way to generate additional revenue. The House Committee on Ways
and Means and the Senate Committee on Finance are expected to hold hearings on various proposals in 2011.
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