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[kirblar]

If you actually care about policy implementation, this is something important to understand. The employer-based health-care system we had emerged out of wage caps in WWII, and much like the mortgage interest tax deduction, the non-taxation of health benefits is something that redistributes wealth upwards: https://mobile.nytimes.com/2017/07/...on.html?referer=https://t.co/kkRNiv23Zb?amp=1

As Republican senators work to fix their troubled health care bill, there is one giant health insurance subsidy no one is talking about.

It is bigger than any offered under the Affordable Care Act — subsidies some Republicans loathe as handouts — and costs the federal government $250 billion in lost tax revenue every year.

The beneficiaries: everyone who gets health insurance through a job, including members of Congress.

Much of the bitter debate over how to repeal and replace the law known as Obamacare has focused on cutting Medicaid and subsidies that help low-income people buy insurance.

But economists on the left and the right argue that to really rein in health costs, Congress should scale back or eliminate the tax exclusion on what employers pay toward employees’ health insurance premiums. Under current law, those premiums are not subject to the payroll or income taxes that are taken out of employees’ wages, an arrangement that vastly benefits middle- and upper-income people.

That one policy tweak could reduce health care spending, stabilize the health insurance market and, according to Congressional Budget Office estimates, shrink the federal budget deficit by between $174 billion and $429 billion over a six-year period.

Lawmakers briefly pondered the idea this year but quickly abandoned it, recognizing how politically explosive it would be. Still, as Congress seeks to push ahead with major changes to the health system and the tax code, there has been a growing awareness of how long-established tax subsidies — like the mortgage deduction for homeowners — have contributed to economic inequality in the United States.

The tax exclusion, though, is also a subsidy, one that disproportionately helps the affluent, who are more likely to receive generous health benefits from an employer and who fall into higher tax brackets, making the tax break worth more.

A 2008 study by the Joint Committee on Taxation found that not paying taxes on these benefits saved people with incomes less than $30,000 about $1,650. For people with incomes above $200,000, the average tax savings was $4,580.

The Affordable Care Act required companies to start reporting the value of employer-sponsored health benefits on W-2 forms (Box 12; Code DD). But most people don’t even realize they get a subsidy typically worth thousands of dollars a year.

For the federal government, the health benefits exclusion is the single largest tax expenditure, accumulating over the next decade to about 1.5 percent of the nation’s gross domestic product. (Economists say it is effectively the federal government’s third-largest health care expenditure, after Medicare, which cost about $581 billion last year, and Medicaid, at $349 billion.)

It costs five times as much as the subsidies the Affordable Care Act set up to help people buy health insurance, which are estimated to total $49 billion this year. And it is far more than the $70 billion the federal government is spending to expand Medicaid under Obamacare this year.

 

[RustyNails]

Why didnt Obamacare tweak that subsidy or made it more saturated across employers? Looks like a big cash cow.

 

[kirblar]

Why didnt Obamacare tweak that subsidy or made it more saturated across employers? Looks like a big cash cow.

Because like the Mortgage Interest exemption, it's a political minefield because its benefits accrue to the people most likely to vote.

The "Cadillac Tax" was a partial attempt to fix this issue.

 

[Justin Bailey]

Yeah, this would affect middle America to the bone. Whoever did this would be crucified at the polls.

 

[UnemployedVillain]

A 2008 study by the Joint Committee on Taxation found that not paying taxes on these benefits saved people with incomes less than $30,000 about $1,650. For people with incomes above $200,000, the average tax savings was $4,580.

I'm a bit confused. It seems like people making less are saving a more significant portion of their income and that it helps them out to a higher degree than those making more, unless I'm misunderstanding

 

[yankeeforever2]

Yeah I make 70k and my health plan costs my employer 12k, so I would get taxed for 82k right? Yeah no thanks

 

[otake]

That removing employee sponsored health care from tax exclusion would, literally, effect the entire middle and upper middle class. It would result in increasing taxes on anyone who actually pays them.

This would be insanity.

 

[otake]

Yeah I make 70k and my health plan costs my employer 12k, so I would get taxed for 82k right? Yeah no thanks

Exactly. No sane politician would propose this because it is fucking insane.

I don't mind paying taxes but this is not right.

 

[kirblar]

I'm a bit confused. It seems like people making less are saving a more significant portion of their income and that it helps them out to a higher degree than those making more, unless I'm misunderstanding

The issue is that if someone's making 200K, you really don't need to be giving them a tax break.

 

[otake]

The issue is that if someone's making 200K, you really don't need to be giving them a tax break.

That is not a fair statement. It really depends on where you live and the cost of living which includes sales and state tax.

 

[kirblar]

That is not a fair statement. It really depends on where you live and the cost of living which includes sales and state tax.

No one making 200K is poor and living on the razor's edge. No one. Not in NY, not in SF. Nowhere in America is the cost of living so high that 200K requires government assistance to get by.

 

[You Are Viewtiful]

Yeah I make 70k and my health plan costs my employer 12k, so I would get taxed for 82k right? Yeah no thanks

The tax rate wouldn't be so high if there wasn't this costly subsidy.

 

[UnemployedVillain]

The issue is that if someone's making 200K, you really don't need to be giving them a tax break.

Going by this calculator
A person making $200k is paying $47k in taxes and saving ~10%.
A person making $30k is paying $3k in taxes and saving ~55%.

Whether you think the person making $200k should be getting any tax break is a somewhat tangential discussion (and you're right, they really don't need much if any at that point). I'm just trying to understand how this isn't more beneficial to lower income people. Is it because, as the article states, they're unaware of the subsidy?

 

[Chumly]

I'm a bit confused. It seems like people making less are saving a more significant portion of their income and that it helps them out to a higher degree than those making more, unless I'm misunderstanding

No your right. It would be devasting to everybody except the rich to just straight up repeal the exemption. That's why politicians don't touch it.

 

[God Dayumm]

DUH, that's how employer benefits are supposed work. If they are going to tax me same for benefits, might as well just give it to me all in cash.

 

[kirblar]

DUH, that's how employer benefits are supposed work. If they are going to tax me same for benefits, might as well just give it to me all in cash.

This is the endgame goal here. To sever the employment/health insurance link and have it all set up like Car Insurance.

Going by this calculator
A person making $200k is paying $47k in taxes and saving ~10%.
A person making $30k is paying $3k in taxes and saving ~55%.

Whether you think the person making $200k should be getting any tax break is a somewhat tangential discussion (and you're right, they really don't need much if any at that point). I'm just trying to understand how this isn't more beneficial to lower income people. Is it because, as the article states, they're unaware of the subsidy?

a) because this is employment-based, it's a benefit unavailable to those not working
b) it's a lot of money that we're wasting on people who don't need it that we could shift towards subsidizing those who do.

 

[ArkhamFantasy]

That is not a fair statement. It really depends on where you live and the cost of living which includes sales and state tax.

If somebody is living somewhere that requires more than 200k to live thats on them.

 

[O Canada Our Home and Native Land]

The middle class shouldn't take a hit. If the law can be tailored to tax people making over 150k then I would be for it.

 

[CampbellzSoup]

The middle class shouldn't take a hit. If the law can be tailored to tax people making over 150k then I would be for it.

Yup stop fucking the middle class go after people who make over a certain amount.

 

[UnemployedVillain]

The middle class shouldn't take a hit. If the law can be tailored to tax people making over 150k then I would be for it.

Yeah this seems more ideal to outright removing it

 

[kirblar]

Holy fuck, people making 200K+ are not middle class.

They are in the top 6-7% of income earners in the US!

 

[Unknown Soldier]

Single-payer is not OK because it would "crash the economy" according to GAF but removing this exemption is? LMAO

 

[ArkhamFantasy]

Holy fuck, people making 200K+ are not middle class.

They are in the top 6-7% of income earners in the US!

Thats almost 5x the median household income where i live (Oklahoma).

 

[kirblar]

Household Income Percentile Minimum Income to Reach, 2015
10% $13,234.00
20% $22,680.00
30% $32,068.00
40% $43,309.00
50% $56,025.00
60% $72,000.00
70% $90,564.00
80% $116,890.00
90% $161,915.00

Source: https://dqydj.com/household-income-percentile-calculator/

Single-payer is not OK because it would "crash the economy" according to GAF but removing this exemption is? LMAO

Yes, removing it and redistributing the benefits more progressively would be a good thing!

Making it a flat per capita tax credit, for instance, alleviates many of the issues!

 

[Ether_Snake]

Going by this calculator
A person making $200k is paying $47k in taxes and saving ~10%.
A person making $30k is paying $3k in taxes and saving ~55%.

Whether you think the person making $200k should be getting any tax break is a somewhat tangential discussion (and you're right, they really don't need much if any at that point). I'm just trying to understand how this isn't more beneficial to lower income people. Is it because, as the article states, they're unaware of the subsidy?

That's a silly way to calculate tax breaks. If someone made a billion and had a 1% saving, it's still too much and instead that money should be used to boost the tax break for the ones that need it most.

No it's not a different discussion at all.

Taxes aren't about fairness, they're about efficiency.

 

[CampbellzSoup]

Holy fuck, people making 200K+ are not middle class.

They are in the top 6-7% of income earners in the US!

Stop telling people what or what not middle class is.

 

[UnemployedVillain]

That's a silly way to calculate tax breaks. If someone made a billion and had a 1% saving, it's still too much and instead that money should be used to boost the tax break for the ones that need it most.

Taxes aren't about fairness, they're about efficiency.

Good thing we have a progressive tax system.

The problem is with billionares getting a number of unfair exemptions (for things only rich people would have) that allow them to avoid paying their proper tax burden

 

[Steel]

Single-payer is not OK because it would "crash the economy" according to GAF but removing this exemption is? LMAO

You're misinterpreting that line of thought. Public options are used more often in Europe than single payer often to better effect and would have a lesser effect on the economy in the U.S. than single payer so there's no real reason to push for single-payer over a public option.

That being said removing this subsidy altogether instead of reworking it is bonkers.

 

[kirblar]

You're misinterpreting that line of thought. Public options are used more often in Europe than single payer often to better effect and would have a lesser effect on the economy in the U.S. than single payer so there's no real reason to push for single-payer over a public option.

That being said removing this subsidy altogether instead of reworking it is bonkers.

Yeah, given that we want to be subsidizing healthcare, you would never want to remove it without a replacement that flattens its benefits out.

Stop telling people what or what not middle class is.

....how dare I actually call someone making 200K upper class?

 

[mugurumakensei]

Stop telling people what or what not middle class is.

Middle class are households in the 30-70 percentiles of income. If you're in the 0-25 range, you are port. If you're in the 75-100 range, you are in the esteemed upper class.


There is no state or city where $200k is middle class. There are cities where 90-150k is middle class though due to CoL.

 

[kirblar]

If you loosen it up (in part to adjust to regional CoL variance) and make upper-class the top 20% (which I think is fair) then upper class starts at 120K+. Which is perfectly reasonable.

 

[G.ZZZ]

You understand how fucked americans are when someone like Kirblar is considered to be a socialist-lite stealing money from hard workers from posters on a relatively liberal discussion board.

All aboard the future with no taxes, no road, no schools, no transportation, everyone for itself! But look at me paying no taxes! I'm so rich!

 

[O Canada Our Home and Native Land]

It's easier to legislate if we pretend the lower-upper class is included in the middle class club. Then we won't get the those Wall Street articles complaining about their hardships.

 

[You Are Viewtiful]

You understand how fucked americans are when someone like Kirblar is considered to be a socialist-lite stealing money from hard workers from posters on a relatively liberal discussion board.

All aboard the future with no taxes, no road, no schools, no transportation, everyone for itself! But look at me paying no taxes! I'm so rich!

It's weird because this is more or less a socialist programme for those who are fortunate enough to have a job. Yes, that's a majority of the country, but that doesn't make it not a subsidy.

 

[CampbellzSoup]

http://taxformcalculator.com/state_tax/new_york/200000.html

Just using New York as an example 200,000 actual take home pay is 131,000.

 

[kirblar]

http://taxformcalculator.com/state_tax/new_york/200000.html

Just using New York as an example 200,000 actual take home pay is 131,000.

We use pre-tax pay to gauge income because it's the most fair way to test them against each other.

And even after taxes, that person is still in the top 20% of incomes in the USA!

 

[Random Painted HIghway]

Hidden subisdy, right there on your W2, ok. You have to be a complete idiot in 2017 not to know that, or be on your first job. Granted, there is no shortage of evidence that there are a lot of idiots out there.


Also, one of the main drivers of interest in public employment are these health benefits and the majority of government workers are going to middle class or lower. They are going to get hammered here, but maybe that is what "we" want to happen?

 

[kirblar]

Hidden subisdy, right there on your W2, ok. You have to be a complete idiot in 2017 not to know that, or be on your first job. Granted, there is no shortage of evidence that there are a lot of idiots out there.


Also, one of the main drivers of interest in public employment are these health benefits and the majority of government workers are going to middle class or lower. They are going to get hammered here, but maybe that is what "we" want to happen?

Most people do not understand just how much their companies are paying for health care for them behind the scenes. Hence Obamacare sticker shock.

 

[CampbellzSoup]

We use pre-tax pay to gauge income because it's the most fair way to test them against each other.

And even after taxes, that person is still in the top 20% of incomes in the USA!

Again you're still taking someone else's money who's not a millionaire - go somewhere else to find it

 

[kirblar]

Again you're still taking someone else's money who's not a millionaire - go somewhere else to find it

Stop Pretending You’re Not Rich

Beneath a veneer of classlessness, the American class reproduction machine operates with ruthless efficiency. In particular, the upper middle class is solidifying. This favored fifth at the top of the income distribution, with an average annual household income of $200,000, has been separating from the 80 percent below. Collectively, this top fifth has seen a $4 trillion-plus increase in pretax income since 1979, compared to just over $3 trillion for everyone else. Some of those gains went to the top 1 percent. But most went to the 19 percent just beneath them.

The rhetoric of “We are the 99 percent” has in fact been dangerously self-serving, allowing people with healthy six-figure incomes to convince themselves that they are somehow in the same economic boat as ordinary Americans, and that it is just the so-called super rich who are to blame for inequality.

Politicians and policy wonks worry about the persistence of poverty across generations, but affluence is inherited more strongly. Most disturbing, we now know how firmly class positions are being transmitted across generations. Most of the children born into households in the top 20 percent will stay there or drop only as far as the next quintile. As Gary Solon, one of the leading scholars of social mobility, put it recently, “Rather than a poverty trap, there seems instead to be more stickiness at the other end: a ‘wealth trap,’ if you will.”

There’s a kind of class double-think going on here. On the one hand, upper-middle-class Americans believe they are operating in a meritocracy (a belief that allows them to feel entitled to their winnings); on the other hand, they constantly engage in antimeritocratic behavior in order to give their own children a leg up. To the extent that there is any ethical deliberation, it usually results in a justification along the lines of “Well, maybe it’s wrong, but everyone’s doing it.”

The United States is the only nation in the world, for example, where it is easier to get into college if one of your parents happened to go there. Oxford and Cambridge ditched legacy preferences in the middle of the last century. The existence of such an unfair hereditary practice in 21st-century America is startling in itself. But I have been more shocked by the way that even supposedly liberal members of the upper middle class seem to have no qualms about benefiting from it.

The upper middle class is also doing lots right, not least when it comes to creating a stable family environment and being engaged parents. These are behaviors we want to spread, not stop. Nobody should feel bad for working hard to raise their kids well.

Things turn ugly, however, when the upper middle class starts to rig markets in its own favor, to the detriment of others. Take housing, perhaps the most significant example. Exclusionary zoning practices allow the upper middle class to live in enclaves. Gated communities, in effect, even if the gates are not visible. Since schools typically draw from their surrounding area, the physical separation of upper-middle-class neighborhoods is replicated in the classroom. Good schools make the area more desirable, further inflating the value of our houses. The federal tax system gives us a handout, through the mortgage-interest deduction, to help us purchase these pricey homes. For the upper middle classes, regardless of their professed political preferences, zoning, wealth, tax deductions and educational opportunity reinforce one another in a virtuous cycle.

It takes a brave politician to question the privileges enjoyed by the upper middle class. Recently, there have been failed attempts to make zoning laws more inclusive in supposedly liberal cities like Seattle and states like California and Massachusetts. The handout on mortgage interest appears to be an indestructible deduction (unlike in Britain, where the equivalent tax break was phased out under both Conservative and Labour governments by 2000).

 

[emag]

Stop Pretending You’re Not Rich

Ridiculous article with absurd comparisons to the UK. For example, post-secondary education in the UK is free (or nearly so); parents saving for their children's education in the US -- or trying to provide for their children in general -- isn't something to condemn as the author does.

Instead of trying to tear down the "upper" middle class, let's fix the underlying problems with school/home/etc. affordability.

 

[kirblar]

Ridiculous article with absurd comparisons to the UK. For example, post-secondary education in the UK is free (or nearly so); parents saving for their children's education in the US -- or trying to provide for their children in general -- isn't something to condemn as the author does.

Instead of trying to tear down the "upper" middle class, let's fix the underlying problems with school/home/etc. affordability.

Why do you think Republicans like to go after public education?

(answer: because it's a social benefit they're opting out of, going w/ private and/or religious schools instead!)

Same w/ health care and the reason they want to target medicaid.

 

[emag]

It's putting the cart before the horse. Forcing the "rich" to live/suffer like poor so that they'll eventually vote for better policies is absurd. Those $200K+ NYC/DC/SF/LA households already voted overwhelmingly in favor of single-payer/public option healthcare, affordable college, and a host of social services. How did the poorest parts of Appalachia vote?

 

[WedgeX]

"But I earned it" is the most entitled, yet also easiest to rationalize, way everyone thinks about government subsidized employer health insurance and the mortgage interest deduction. Despite there being no actual difference between the money spent to subsidize those and Medicaid or section 8 housing.

A great way to entrench policy, but also a great way to decrease trust in the government.

 

[Trouble]

Because like the Mortgage Interest exemption, it's a political minefield because its benefits accrue to the people most likely to vote.

The "Cadillac Tax" was a partial attempt to fix this issue.

Spot on. Eliminating tax breaks that benefit the wealthy is tough, eliminating tax breaks that benefit the middle/upper middle classes is suicidal.

Also, their whole 'employer insurance mandates are job killers' line would get thrown right back in their stupid faces.

 

[SapientWolf]

Hidden subisdy, right there on your W2, ok. You have to be a complete idiot in 2017 not to know that, or be on your first job. Granted, there is no shortage of evidence that there are a lot of idiots out there.


Also, one of the main drivers of interest in public employment are these health benefits and the majority of government workers are going to middle class or lower. They are going to get hammered here, but maybe that is what "we" want to happen?

Sure, it's on the form, but I'm not sure why there would be an expectation that it would be taxed as income. It doesn't have to be reported as income.

 

[kirblar]

It's putting the cart before the horse. Forcing the "rich" to live/suffer like poor so that they'll eventually vote for better policies is absurd. Those $200K+ NYC/DC/SF/LA households already voted overwhelmingly in favor of single-payer/public option healthcare, affordable college, and a host of social services. How did the poorest parts of Appalachia vote?

Earning $132K instead of $135K a year is not "suffering". (I'm presuming that initial 1.5K in tax breaks gets preserved somehow)

If you don't think there's an issue with upper-class gatekeeping in blue American cities, you really haven't been paying attention.

 

[SoRuffShoNuff]

The issue is that if someone's making 200K, you really don't need to be giving them a tax break.

There needs to be a sliding scale for tax breaks. It's pretty damn ridiculous that me and my wife earned 1000 bucks more than the cutoff for being able to claim a deduction for our student loans. You can't tell me the family that made 1000 leave dollars than us deserved the full deduction while we shouldn't get a damn thing.

We are absolutely starting to see why so many people vote strictly for tax cuts. It's especially infuriating when liberals trash you for even wanting to have the discussion.

 

[kirblar]

There needs to be a sliding scale for tax breaks. It's pretty damn ridiculous that me and my wife earned 1000 bucks more than the cutoff for being able to claim a deduction for our student loans. You can't tell me the family that made 1000 leave dollars than us deserved the full deduction while we shouldn't get a damn thing.

We are absolutely starting to see why so many people vote strictly for tax cuts. It's especially infuriating when liberals trash you for even wanting to have the discussion.

Agreed, arbitrary caps are terrible policy. It creates very bad incentives.

 

[tokkun]

You can't tell me the family that made 1000 leave dollars than us deserved the full deduction while we shouldn't get a damn thing.

I won't tell you that, because it is not true. Like almost all deductions, there is a phase-out period. In the case of the tuition deduction, it's phased out over a $30K window.

For 2016, the value of the Tuition and Fees Deduction begins phasing out at AGIs of $65,000 ($130,000 if married filing jointly). If your adjusted gross income is $65,000 or less ($130,000 or less if married filing jointly), then you will qualify for the full $4,000 deduction. If your AGI is from $65,001 to $80,000 ($130,001 to $160,000 if married filing jointly), the maximum amount of your Tuition and Fees Deduction will be reduced. If your AGI is above $80,000/$160,000, the deduction will not be available to you.

https://www.efile.com/student-tax-deduction-college-education-loan-interest-tuition-fee-deductions/