October 9, 2015
Some of the features of Bobby Jindal’s recently released tax plan – fewer tax brackets, ending the estate tax, and eliminating itemized deductions – should be familiar from other Republican candidates’ tax plans. But a few elements of Jindal’s plan stand out from the rest of the field. Specifically, Jindal would significantly change the tax treatment of employer-sponsored health insurance plans.
Since the 1940s, health insurance benefits provided by employers have not been subject to federal taxation. Businesses are able to deduct the cost of health insurance provided to employees, while employees are not required to report health insurance benefits as taxable income. Essentially, this amounts to a tax subsidy of employer-sponsored health insurance, which many have blamed for fueling high healthcare costs. In addition, the exclusion leads to over $200 billion in lost tax revenue every year, one of the most expensive provisions in the tax code.
During the 2008 campaign, candidate John McCain called for replacing the health insurance exclusion with a health insurance credit – thereby requiring Americans to report the value of health insurance benefits as income. He was attacked for this proposal by the Obama campaign, who accused him of taxing healthcare benefits “for the first time in history.” Two years later, President Obama would sign into law a tax on healthcare benefits over a certain threshold – the Cadillac tax – as part of the Affordable Care Act.
Read the full article at the Tax Foundation: Bobby Jindal’s Tax Plan Would End the Employer-Sponsored Health Insurance Exclusion