Grassley Urges Caution On New Health Tax Breaks

by Leroy Baker, Tax-News.com, New York

10 March 2006

Charles Grassley, Chairman of the Senate Finance Committee, has urged lawmakers to take a close look at tax breaks associated with existing health schemes before Congress endorses new proposals for Health Savings Accounts in President Bush's 2007 budget.

Under Bush's budget proposal, an expansion of health savings accounts, a tax credit for the purchase of health insurance, and other measures would cost around $136.5 billion.

Employer-provided health benefits are excluded from income for both income-tax and payroll-tax purposes under current law.

Self-employed medical expenses are deductible from business income for income-tax purposes only.

However, in a hearing entitled 'Taking a Check-up on the Nation's Health Care Tax Policy: A Prognosis' on Wednesday, Grassley argued that: "Before we add more tax subsidies, we first should look to see if we can make the incentives we have today work better."

According to Grassley, the federal government’s tax expenditure for employer-provided health benefits is the largest single tax expenditure - about $1 trillion over 10 years for income taxes and over $970 billion over 10 years in FICA taxes.

Also invited to contribute to the hearing were Paul O’Neill, former Secretary of the Treasury, Robert W. Lane, Chairman and CEO of John Deere, Inc who represented the Business Roundtable, and Leonard E. Burman, Senior Fellow and Co-Director, Tax Policy Center, Urban Institute.

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