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The Tax Equity for Health Plan Beneficiaries Act

The Tax Equity for Health Plan Beneficiaries Act

H.R. 2625, S. 1153

This bill seeks to provide uniform tax treatment for employer-provided health insurance, which would end taxation of benefits for domestic partners under employers' health plans.

Currently, employer-provided health coverage for different-sex spouses is excluded from an employee’s gross income, while coverage for domestic partners is not. Consequently, employees with domestic partners pay more income and payroll tax than they would with a different-sex spouse. Furthermore, employers who offer benefits to domestic partners also pay additional payroll taxes, in addition to dealing the administrative burden of calculating taxes separately. Fifty-seven percent of Fortune 500 companies already provide such coverage to domestic partners of employees, but federal tax law has not kept up with the business community, and these employers are also taxed inequitably. This ultimately creates an undue burden not only on employees but on businesses, discouraging inclusivity in their policies.

This bill is solidly grounded in Republican values, as it lowers taxes and gives businesses the economic freedom to choose who they insure. The bill does not mandate that employers provide coverage to domestic partners, nor does it establish criteria for determining who counts as a beneficiary, and thus leaves businesses freedom in deciding how much health care coverage they wish to extend to their employees; the bill simply eliminates the disproportionate tax burden on both parties if the employer chooses to recognize domestic partners.
The bill would also allow domestic partners to be included in pre-tax cafeteria plan elections, receive full benefits from Voluntary Employees’ Beneficiary Associations (VEBAs), and be covered by Health Related Savings Accounts. Moreover, the bill would equalize the treatment of health coverage for spouses and for domestic partners for payroll tax purposes, thus removing the burden on inclusive businesses of filing such taxes separately.

Log Cabin Republicans support this bill because it is necessary to reduce the inordinate tax burden on employees with domestic partners and on inclusive businesses.