The debate over how to pay for the expiring provisions of the 2017 Tax Cuts & Jobs Act (TCJA) has intensified as the new Congress and administration settle in. One of the revenue-generating proposals that has emerged is the idea of increasing taxes on American workers with employer-provided health care coverage. However, many are concerned that burdening hardworking Americans with new taxes on something as fundamental as health care coverage is not the solution voters are looking for.
Various conservative and bipartisan organizations, including the Paragon Health Institute, Heritage Foundation, Republican Study Committee, Cato Institute, and the Bipartisan Policy Center, have recommended taxing employer-provided health care coverage to pay for extending the TCJA. With close ties to President Trump, these proposals have raised concerns among employers and unions that workers’ benefits could be taxed.
Employer-provided health care coverage is a crucial part of American employment, with more than 178 million Americans relying on it. Any proposal to tax these benefits would undermine a system that the majority of Americans and their families depend on for affordable health care.
The rising cost of health care is a significant economic challenge, with annual per-capita health expenditures expected to exceed $15,700 in 2025 and rise to nearly $22,000 by 2032. Taxing workers on their health coverage would only add to their financial burden, especially at a time when many families are struggling to meet essential needs.
Proponents of taxing health coverage argue that they would only target higher-income individuals or those with “Cadillac” plans. However, once such a tax is implemented, it could be expanded to include more people whenever the government needs additional revenue. This could ultimately lead to pushing employers out of their role as sponsors of health care coverage, which would be counterproductive as employer coverage has been shown to be a tremendous bargain for the American taxpayer.
According to the White House Office of Management and Budget, $216 billion in forgone taxes on workers and families was attributed to the income tax exclusion for employer-provided health coverage in 2023. The Bureau of Economic Analysis reported that employer group health insurance funds paid out $1.3 trillion that same year, resulting in a more than 6-to-1 return on the government’s investment.
Employer-provided health insurance not only brings value to the economy but also provides the best return for taxpayers compared to other health coverage options in the United States. While there are differences in health status and demographics among different coverage options, employer plans are still a cost-effective choice for taxpayers.
In conclusion, taxing employer-provided health care coverage to pay for the TCJA extension may not be the most effective or beneficial solution. It could burden American workers, undermine a critical aspect of American employment, and ultimately lead to higher costs for taxpayers. Alternative revenue-generating strategies that do not impact essential benefits like health care coverage should be considered to address the forthcoming tax bill. Recent data from the Congressional Budget Office (CBO) highlights the increasing cost to the federal government of exchange marketplace plans. With the Affordable Care Act’s (ACA) enhanced subsidies, the cost of these plans is projected to exceed $6,000 this year and could surpass $7,000 by 2027. This raises concerns that if Congress eliminates the health care tax exclusion, individuals leaving employer coverage may be pushed into more expensive markets within the health care system.
Moreover, targeting employers with such policies could lead to potential cuts in benefits or even the dropping of coverage, resulting in a higher number of uninsured Americans. According to the Centers for Disease Control and Prevention, affordability remains a major reason why adults aged 18 to 64 choose to remain uninsured. This could lead to healthier individuals opting out of coverage, causing premiums to rise for those who remain insured.
In 2019, a bipartisan bill was signed into law by President Trump, repealing the ACA’s “Cadillac Tax” on employer-provided health care coverage. The current question is whether President Trump will continue to support American workers by rejecting proposals to tax health benefits for the first time.
There is widespread bipartisan support for protecting workers’ health care coverage and opposing detrimental proposals to tax health benefits. As the chair of UNITE HERE HEALTH and the president of the American Benefits Council, we have joined a coalition of 70 employer groups, unions, patient groups, and other stakeholders urging Congress not to disrupt the vital employer-provided health coverage that many Americans rely on for essential care.
It is crucial for Congress to reject any proposal that undermines the health and financial security of American workers. By prioritizing the protection of workers’ health care coverage, policymakers can ensure that millions of Americans have access to lifesaving care.
D. Taylor, Chair of Unite Here Health, and Katy Johnson, President of the American Benefits Council, emphasize the importance of safeguarding employer-provided health coverage and ensuring the well-being of American workers.
