Washington Matters
No, Health Benefits Won't Be Taxed
And anyone who tells you that Kiplinger reported otherwise has it all wrong.
By Mark Willen, Senior Political Editor, The Kiplinger Letter
June 3, 2010
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We try not to pay attention to the unsubstantiated rumors that so often go viral on the Internet, but we were forced to take notice of one that clearly mischaracterized a story we wrote. We have been besieged with comments and e-mails, some complaining about what the writers said we said, others more wisely asking what the real story is.
Here are the facts: The new health law requires that employers start reporting the value of the health benefits you get on your W-2 form for 2011 (the one you’ll receive in January 2012). But the benefits will not be added to your taxable income, so you’ll pay no additional tax. The requirement is a hassle and expense for employers, but its aim, according to sponsors, is to help. The idea is that if workers know how much their employers actually pay for health benefits, they’ll work harder to keep costs down and be more understanding when pay raises are modest.
The e-mail campaign cited a story we did several weeks ago that clearly explained all this, but the rapidly circulating chain e-mail reported we said exactly the opposite: That the benefits would be taxed. FactCheck.org debunked the claim, citing the text of the law and official regulations. There are plenty of other tax hikes in the bill, as our story explained, but a tax on benefits isn’t one of them.
Some folks fear that even if the law doesn’t require taxing benefits now, it will eventually. To them, reporting the value of the benefit is just a first step that will lead inevitably to taxation.
Perhaps. Taxing benefits is certainly a possibility down the road. In fact, Sen. John McCain of Arizona proposed exactly that when he was the GOP presidential candidate in 2008.
But claiming that the tax is a done deal is simply false. For now, at least, that health benefit line you’ll see on your W-2 is strictly informational. (A tax on so-called Cadillac health care plans will likely be passed on to workers, but that's a separate issue and won't arrive until 2018.)
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Reader Comments (7)
Posted by: j at 06/06/2010 07:09:03 AM
"The idea is that if workers know how much their employers actually pay for health benefits, theyll work harder to keep costs down and be more understanding when pay raises are modest." Is this supposed to be acceptable?
Posted by: ron at 06/07/2010 11:45:16 AM
If you are to believe that the Gov. only wants you to,know how much you are really getting payed to work harder than you are more gollible than I thought.The new heath care bill will eventually cost everyone more in time to come .if you think that gov. is really not going to raise your taxes and they know that you have a larger income than we really need to wake up and look at reality.This Gov. is not about the people it serves but about more take over and it will eventually strike you pocket book.Lets not be deceived buy their usual despective mistruths (lies).
Posted by: JD at 06/07/2010 12:59:55 PM
I don't know how you can write this article and then put the "Cadillac" tax in parentheses at the bottom. That tax is clearly a tax on health care benefits, and one that's not indexed to inflation. As to people inferring that reporting is the first step to taxation, well, that seems pretty reasonable to me. It amazes me that anyone who dares infer anything that's "not actually in the bill" is supposed to be a bad person when talking about ObamaCare, but people up to Obama himself are free to do it when it comes to inferring racial profiling out of Arizona's recent immigration enforcement bill. Blatant double-standard.
Posted by: SaucyWench at 06/21/2010 11:00:08 AM
Thats fine let the employers put it on the w-2's. However I forsee my pen leaking all over it and severely blotting out the part about our insurance. There is no reason for it to be reported at all. It is not taxed and shouldn't be. This is just one more thing that they expect us to just lay down for. Why ??? We need to just not freaking do it. What are they gonna do arrest everybody in the country ? The IRS is an illegal entity anyway. I think that everybody's pen should leak and blot out their insurance information. Reporting it is just one step closer to taxing it. They are also looking for those who don't have it so they can fine or jail them.
Posted by: x at 06/29/2010 10:49:54 PM
The company I work for, Kaiser Permanente began providing annual reports to its employees a few years ago which listed the varies costs of that employee in health benefits, retirement contributions, worker's comp, etc. It was very eye-opening and why shouldn't a company share that information with their employees? The purpose of adding this information to the w-2s is to further engage workers in the dialogue about spiraling health care costs. Those groups that aren't willing to even discuss the issue with management are always the most surprised when companies drop health care benefits entirely. Americans want the best health care, they want it now, and they want it to be magically free. That ain't gonna happen. SOMEONE has to pay for it. Your choices are higher premiums, higher taxes, lower wages, or less care. If you want someone to blame, then maybe a tax on those items that lead to chronic health conditions would do the trick. Like cigarettes and soda.
Posted by: Tom Jones at 06/30/2010 08:44:45 PM
If the truth was so employees would know the costs and try to help keep those costs down, this information would be given to them in a plethora of other formats. The fact that this is to be put on the W-2 forms is a precursor to the inevitable. YOU WILL BE TAXED ON INCOME YOU WILL NEVER RECEIVE. Anyone disputing this fact can go ahead and read the bill. Be my guest to read it. You may be the first to do so. The fact that entitlements are on the rise adds fuel to the fire. I could go on for days.
Posted by: Mike at 07/25/2010 03:21:01 PM
If the sole purpose is to raise awareness about the benefit we're getting, then why not just make companies provide this to employees in a separate form?? The problem is that greedy government officials are going to get this information. Eventually their brain will compute the additional thousands in taxes they could get to spend if this amount was included.