The tax advisory commission appointed by President Bush is considering a proposal that would reduce the number of tax-free premium payments for employer-paid health insurance.
The proposal would limit these payments to the average cost of the premium the government pays for federal workers. That is about $11,000 a year for family coverage.
Currently, employers can deduct what they pay for health insurance for their workers, and workers are not taxed on this benefit. The proposal would allow taxpayers whose employers did not provide health insurance to deduct the amount of the premiums they paid for themselves.
Limitless tax-free health insurance premiums encourage companies to offer overly generous insurance and result in increased health costs, one proponent says. The Congressional Budget Office calculated this year that a limit of $3,720 in tax-exempt premiums for an individual and $8,640 for a family would raise $706 billion over 10 years.
