Most of us fortunate to have employer sponsored health insurance never give second thought to the fact that what our employer spends on us is tax-free income, many thousands of dollars each year in fact. We also don’t consider that the value of that tax break is unrelated to income. That is, whether you make $30,000 a year or $130,000, your employer may be spending $12,000 or more on your health benefits.
What would happen if all or a portion of that we’re to become taxable income (without the additional cash to pay the taxes)? We may get the chance to find out!
A new report from the General Accountability Office takes a look at all the tax breaks Americans receive. The report’s listed examples of “tax expenditures” includes exclusions from taxable income (such as the current exclusion of employer-paid health care premium contributions) and deferrals (such as pre-tax contributions to defined contribution arrangements). According to the Office of Management and Budget’s most recent budget proposal, health and retirement plan contribution incentives respectively constitute the first and second-largest expenditures in the federal budget.
The first and second largest expenditures; some would call that low hanging fruit.
Read the full report here.