A new study by two Harvard researchers has found that taxing job-based health benefits would heavily penalize insured, working families.
The study, "The regressivity of taxing employer-paid health insurance," written by David Himmelstein, MD, and Steffie Woolhandler, MD, professors at Harvard Medical School and primary care doctors at Cambridge Hospital in Massachusetts, appeared in the Aug. 19 online edition of the New England Journal of Medicine.
"Most economists and many politicians have claimed that taxing health benefits would hit the wealthy hardest, while sparing the poor,” said Himmelstein. “But exactly the reverse is true. For a poor, insured family a tax on their health benefits would take almost one-fifth of their total income."
President Obama has said he has not ruled out such a tax to help fund healthcare reform.
Analyzing income and insurance data from the 2005 Current Population Survey of the U.S. Census Bureau and other sources, the authors reveal that taxing workers' job-based health insurance would cost those with low-incomes ($0- $10,000 annually) 18.3 percent of their income, but cost high-income (over $100,000) families a mere 2.7 percent.
The authors note that the tax rate would drop even lower for the rich. “Though taxing health benefits would spare the uninsured, the average poor family with employer-paid coverage would be taxed at a rate 140 times higher than Wall Street titans."
"Instead of taxing benefits, politicians should embrace the only affordable option for universal coverage: a single-payer, Medicare-for-all program,” said Woolhandler. “Single-payer would save $400 billion annually by simplifying administration, enough to assure quality care for everyone. We cannot afford to keep wasteful private health insurers in business, and pay for it off the backs of working families."