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How capping the tax exclusion may disproportionately burden children & families

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May 28, 2009 | Insuring our Future: Addressing the Needs of Children in Health Reform

How Capping the Tax Exclusion May Disproportionately Burden Children and Families 

by Elise Gould

Employer contributions to health insurance premiums are excluded (without limit) from workers’ taxable income. Proposals to tax all or some of employer-sponsored health premiums have been forwarded as a means of paying for health reform.

This paper examines how proposals to cap the tax exclusion may unintentionally disadvantage another group — those with family plans — a subject yet to be discussed in the public discourse. While taxing health premiums to any extent may erode access to employer-sponsored insurance, policymakers should also be wary of changes to the tax treatment that disproportionately weaken families’ access to insurance. At the very least, reform should create a level playing field.

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