Why is employer paid health insurance not taxed as a part of wages?
Companies that provide health insurance deduct what they pay as an expense and their employees don't pay taxes on a huge benefit. That makes health care for those with employer paid health insurance almost free for them. Why shouldn't your employer pay for your auto insurance, too? Why is this fair to those that have to pay their own medical bills? What type of socialism is this?
Cogent arguments only, please.
- tott1Lv 51 decade agoBest Answer
when employer paid medical insurance started it was because employees were taxed on their wages and often giving them a pay raise resulted in changing the employees tax bracket and could result in less take home pay. so the unions and corporations began using fringe benefits instead of pay raises to compete for the best employees these included health ins. vacation pay and sick pay retirement plans vision care and dental care all paid for by the company. the employe got something that he could use without paying taxes on the money to buy it and the company deducted it as labor expense same as a wage increase.
- Mike WLv 71 decade ago
Health insurance was originally used as a benefit in lieu of higher pay, later it became a benefit deducted from the employee wages, somewhere along the way it was decided that it would not be taxed. The deduction should be available to those who are self employed, and those who choose not to use their employers health plan, in lieu of using their own. Here's another strange tax law. You cannot deduct job hunting expenses unless you're employed during the time that you're looking for a job.
- My Baby!Lv 71 decade ago
If you work for someone they pay your health care and they can right it off as an expense same as the self employed do also. If you pay your part they do not tax that part either. It is subtracted from your gross wages and you are taxed on your after Health care wages. If you have personal ins. it is also taken off but only if you can use deductions. If you do not have enough deductions then you can not. It is like you can not right off your house taxes if you do not have enough deductions to go the long form. Say you lived in an apartment and you made $40,000. a year. Your private health ins. is $200. a month. You would have to look at the chart and do the math to figure if you have the allowable % to deduct. In this case probably No.
This is just another way of the tax code being used to confuse. Has nothing to do with socialism.
- katmandu_85219Lv 71 decade ago
It is part of the benefit package necessary to attract quality employees. Vacation, sick leave, autos, life insurance and other goodies are also often a part of a pay package.
It is not free, it is earned like the other benefits. If you did not
receive insurance, you would receive higher wages.
There has always been a push to tax such benefits, but it is considered to put too heavy a burden on the middle class.
This is not socialism, it is true capitalism. A benefit to attract a
better type of employee and keep the employee.
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- Anonymous1 decade ago
To be fair. It should be. It is a benefit. But in fact, it is the other way around. Companies are given tax breaks to give you insurance.
How about your unemployment insurance and the company paid portion of SS.
Not that I would vote for it but it is part of your pay.
- JacquelineLv 44 years ago
You can negotiate wages but likely not health care benefit coverage as these are group plans. The employer can't discriminate against members of the group. Unless you are in a very high and select group of individuals wages will be the only thing you have leverage on.
- Anonymous1 decade ago
That's what John McCain proposed. Employer based healthcare is not anywhere near free. It has traditionally been a benefit of a job and auto insurance has nothing to do with it. It's not socialism. I really wish you anothers like you would open a dictionary and read the definition of socialism.
- 1 decade ago
It is not taxed because congress passed a law saying it's not taxed.
I have no problem with that. What is screwy is why a self-employed person cannot deduct their health insurance premiums from their taxes. That doesn't make any sense.
- oimwoomwioLv 71 decade ago
I agree with IP above--if employer-provided plans are not taxed, the self-employed ought not to be taxed on their health insurance either.
It isn't socialism, either--socialism purports to benefit all workers--not just those hired by bigass companies.
- 1 decade ago
for the same reason drugs arent taxed. maybe because most people using legal drugs are retired and on fixed income.it is an essential need like unprepared food which isnt taxed. i dont think it is fair. everyone in this country should have affordable health care ,either through work or ,in my opinion, public option.i have health insurance. my brother doesnt. what makes my life worth more than his because i have insurance and he doesnt.i dont think jesus would see that as fair. are we not all his children?