New study reveals taxing job-based health benefits would hit working families hardest

August 20, 2009

As the debate over health care reform continues to unfold in town hall meetings and on Capitol Hill, a new study by two Harvard researchers has found that taxing job-based health benefits would heavily penalize insured, working families.

The study, titled "The regressivity of taxing employer-paid health insurance," appears in the August 19 online edition of the New England Journal of Medicine. It was written by Drs. David Himmelstein and Steffie Woolhandler, professors at Harvard Medical School and primary care doctors at Cambridge Hospital in Massachusetts.

The taxation of employer-sponsored health benefits has been advocated by many health economists and lawmakers, including some members of the influential Senate Finance Committee, which is now drafting health care reform legislation. President Obama has said he has not ruled out such a tax to fund his reforms.

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. (See the table from the study at http://healthcarereform.nejm.org/?p=1521 )

The authors note that the tax rate would drop even lower for the super-rich. "A Goldman Sachs executive who enjoyed the firm's infamous $40,543 health plan got a federal tax subsidy of about $15,367 last year," they write. "But that's only 0.13 percent of the bonuses received by the company's four top earners. So 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."

Dr. David U. Himmelstein, lead author of the study and associate professor of medicine at Harvard, added: "Most economists and many politicians have claimed that taxing health benefits would hit the wealthy hardest, while sparing the poor. 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."

Dr. Steffie Woolhandler, co-author and professor of medicine at Harvard, said: "Instead of taxing benefits, politicians should embrace the only affordable option for universal coverage: a single-payer, Medicare-for-all program. 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."

Himmelstein and Woolhandler are co-founders of Physicians for a National Health Program, an organization of 16,000 doctors and medical professionals who advocate for single-payer national health insurance.

More information: "The Regressivity of Taxing Employer-Paid ," David U. Himmelstein, M.D; Steffie Woolhandler, M.D., M.P.H. , August 19, 2009. http://healthcarereform.nejm.org/?p=1521

Source: Physicians for a National Program

Related Stories

Recommended for you

Who uses phone apps to track sleep habits? Mostly the healthy and wealthy in US

January 16, 2018
The profile of most Americans who use popular mobile phone apps that track sleep habits is that they are relatively affluent, claim to eat well, and say they are in good health, even if some of them tend to smoke.

Improvements in mortality rates are slowed by rise in obesity in the United States

January 15, 2018
With countless medical advances and efforts to curb smoking, one might expect that life expectancy in the United States would improve. Yet according to recent studies, there's been a reduction in the rate of improvement in ...

Teens likely to crave junk food after watching TV ads

January 15, 2018
Teenagers who watch more than three hours of commercial TV a day are more likely to eat hundreds of extra junk food snacks, according to a report by Cancer Research UK.

Can muesli help against arthritis?

January 15, 2018
It is well known that healthy eating increases a general sense of wellbeing. Researchers at Friedrich-Alexander-Universität Erlangen-Nürnberg (FAU) have now discovered that a fibre-rich diet can have a positive influence ...

Your dishwasher is not as sterile as you think

January 13, 2018
(HealthDay)—Your dishwasher may get those plates spotless, but it is also probably teeming with bacteria and fungus, a new study suggests.

Study reveals what sleep talkers have to say

January 12, 2018
A team of researchers with members from several institutions in France has conducted a study regarding sleep talking and has found that most sleep talking is not only negative in nature, but involves a large amount of swearing. ...

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.