The Wealthy Might Be Taxed On Their Health Insurance

Obama Recently, President Obama revealed his Jobs Plan. Part of it includes the idea of making the wealthy pay a tax on their health insurance benefits. Currently, they don’t have to pay any such tax. There is some concern that this could eventually lead to taxing all health insurance, (even for the poor).

President Obama recently revealed some of the details about his Jobs Plan. The plan itself, that has been submitted to Congress, is 155 pages long. To make a long story short, the Jobs Plan is a description of the changes, and laws, that need to be made in order to create more jobs for the millions of Americans who are currently unemployed or underemployed.

One might not expect to find something about health insurance included in the Jobs Plan. However, it turns out that there is a portion of it that many people are going to consider to be very important to know about. If the Jobs Plan gets passed into law, (without any changes being made to it), then it would mean that some Americans will be paying taxes on their health insurance.

Specifically, this tax affects people who make enough money to be described as “high-income”. The tax is connected to health insurance plans that are being provided to people through their employers. Couples that make more than $250,000 a year, and individuals that make more than $200,000 a year, will find that they will be paying some taxes on their health insurance policy. This will start in 2013.

Currently, the people who make that amount of money are not paying any taxes on their health insurance plans, (because their health benefits are exempt from taxation at this time). One would expect a certain amount of complaining about the tax from this group, who likely will not be feeling generous enough to willingly pay this tax.

There are other concerns as well. Some Democrats are concerned that if we start taxing the health insurance benefits of people who are high-income, that this could one day open the door for taxing the insurance benefits of people who are middle-income, or low-income, or maybe even people who are living below poverty level. There isn’t any hard evidence that this will happen.

In 2018, (assuming the entire Jobs Plan becomes law without any changes to it), there will be a 40% tax placed on health insurance plans that are worth more than $10,200 (for individuals). The same 40% tax will be placed on health insurance plans that are worth more than $27,000 (for families).

It is worth noting that these dollar amounts reflect the worth of the health insurance plans. It does not mean that individuals who make more than $10,200, or families that make more than $27,000 will be taxed.

Image by Patrick Lentz on Flickr