Thus, it is only fair that in some of my remaining Tax Loophole Closers and Other US Tax Revenue Raisers, I will be focusing on US taxpayers making $200,000 or more.
And also in the recent US fiscal cliff final deal, there was very little in the way of US job creation in it and very little to stimulate the US economy. I think it would be wise to include some wise, directly-targeted, very cost effective, robust US economic stimulation as a key component of the US Debt Reduction Sequester Solution.
Perhaps the most egregious tax loophole on the individual side
is employer-provided tax-free health insurance benefits to its employees.
And one really transparent thing that the Obama Administration has done is that every employee's 2012 W-2, which was very recently received, shows in Box 12 DD the amount of tax-free health insurance that has been provided by the employer. And these amounts will be eye-opening to many US taxpayers.....it certainly was to our family. Check yours out!
Further, the amount of tax-free health insurance that is provided by publicly-held companies to their top 5 executives are readily available in company Proxy Statements filed with the SEC. It has just amazed me as to how incredibly extravagant these tax-free amounts are.
There clearly is nothing wrong with a business paying for health insurance for its employees. It is a very key ingredient of an employee's total compensation package.
Presently, if these employees didn't have this company provided health insurance, they could either obtain health insurance on their own and also pay for it on their own, or they could elect to not have any insurance at all.
But what in the world gives the US Government the right to effectively turn this key element of a total compensation package into something akin to tax-free municipal interest?
What this US Government tax policy does is significantly expand further the economic gap between the rich and the poor, and more specifically in this case, the huge economic gap between the employed and the unemployed, and also the huge economic gap between the employed and the underemployed.
So this US Government tax policy is a clear tax loophole, which singles out a clearly compensation component of a total compensation package as something that should be free of income tax, forever.
In this US Debt Reduction Sequester Solution Debate, I think in deciding what to tax, what not to tax, what US Government expenditures to cut and what not to cut, the driving force behind these decisions should be what choices result in the maximum amount of sustainable US full-time job creation, at a livable wage, and as quickly as possible.
And one really transparent thing that the Obama Administration has done is that every employee's 2012 W-2, which was very recently received, shows in Box 12 DD the amount of tax-free health insurance that has been provided by the employer. And these amounts will be eye-opening to many US taxpayers.....it certainly was to our family. Check yours out!
Further, the amount of tax-free health insurance that is provided by publicly-held companies to their top 5 executives are readily available in company Proxy Statements filed with the SEC. It has just amazed me as to how incredibly extravagant these tax-free amounts are.
There clearly is nothing wrong with a business paying for health insurance for its employees. It is a very key ingredient of an employee's total compensation package.
Presently, if these employees didn't have this company provided health insurance, they could either obtain health insurance on their own and also pay for it on their own, or they could elect to not have any insurance at all.
But what in the world gives the US Government the right to effectively turn this key element of a total compensation package into something akin to tax-free municipal interest?
What this US Government tax policy does is significantly expand further the economic gap between the rich and the poor, and more specifically in this case, the huge economic gap between the employed and the unemployed, and also the huge economic gap between the employed and the underemployed.
So this US Government tax policy is a clear tax loophole, which singles out a clearly compensation component of a total compensation package as something that should be free of income tax, forever.
In this US Debt Reduction Sequester Solution Debate, I think in deciding what to tax, what not to tax, what US Government expenditures to cut and what not to cut, the driving force behind these decisions should be what choices result in the maximum amount of sustainable US full-time job creation, at a livable wage, and as quickly as possible.
What this tax-free health insurance compensation does is to reward people who already have a job. You can't get it unless you are employed. Thus, by eliminating this tax loophole, you lose no US jobs. But yet you provide a substantial amount of money, some of which can permit the US Government to fund true US full-time job creation, at a livable wage.
And the unemployed are totally removed from the opportunity to take advantage of this tax loophole. There is no way they can get this tax-free health insurance provided by the US Government because they don't have a job, and thus don't have an employer providing this benefit for them.
And the same goes for the many underemployed, whose employer will not provide them with health insurance, thus they can't take advantage of this US Government provided tax loophole for just those fortunate to be employed full-time.
But it's more than expanding the economic gap between the employed and both the unemployed and the underemployed.
This US Government tax loophole also further expands the economic gap between the very wealthy employed and all the rest of the employed.
Why? Well, there's a couple of things at play here.
First, the very wealthy employed receive substantially more in company provided health insurance benefits than do everyone else employed by the company. Thus, they not only get more of this employer-provided health insurance compensation, but they also receive more of a US Government tax loophole from having a higher amount of this tax-free health insurance excluded from their taxable income.
And second, the very wealthy employed get an additional US Government tax loophole amount of tax benefit here because they have a higher top marginal income tax rate. Thus, they not only get a larger amount of tax-free income, but their after-tax benefit impact is even more substantial because they now are able to avoid this tax-free income, which would otherwise be taxed at 39.6% starting in 2013.
On the other hand, the tax benefit rate for so many of the non-wealthy employees will not be at a 39.6% tax rate, but rather at a tax benefit rate that is substantially lower, with the overwhelming majority of it at a tax benefit rate of 15% or lower, although some would have a tax benefit rate of 25%.
So, let me do the math to shed additional light on this.
Let's say you have an executive, whose total compensation is significantly above $250,000, and who also receives a very lucrative $20,000 of employer-provided health insurance.
Thus, in 2013, this executive would be receiving an after-tax loophole from the US Government of $7,920, or 39.6% X $20,000.
Then let's say you have an accountant, working for the same company, whose total compensation is say $50,000, and who also receives a fair-to-middling $10,000 of employer-provided health insurance.
Thus, in 2013, this hard-working green eyeshader would be receiving an after-tax loophole from the US Government of only $1,500, or 15% X $10,000.
Thus, in the above example, the highly paid executive receives a tax largesse from the US Government of $7,920, which is a massive 5.3 times the $1,500 tax largesse received by the accountant.
Where's the fairness here?
And people don't understand why there continues to be such a huge gap between the wealthy and everyone else?
And the US Congress, from both sides of the aisle, continues to enact patently unfair tax policies like this one, and then piles on by attempting to hide from their constituencies their votes on, or not allow there to be a vote on this at all, which continues to further expand the huge economic gap between the wealthy and everyone else?
Because there is such a huge difference between what the tax largesse the wealthy executive receives here and what the just regular employee receives, the focus of sound, fair governance should be to address the most egregious element here, and that clearly is the substantially higher tax largesse received by someone having a very high Adjusted Gross Income.
Thus, that's why I think it is imperative that this tax-free health
insurance of those making over $250,000 be taxable, as a key component
of this US Debt Reduction Solution deliberations. And yeah, that means that there
will be quite a few more US taxpayers who will now have some of their
income taxed at a higher tax rate just because this present tax-free
health insurance compensatory income, which is now not included in their
Adjusted Gross Income, will fairly increase their Adjusted Gross
Income, starting in 2013.
When you consider that the above example resulted in $7,920 of higher US federal income taxes in just one year for just one highly-paid executive, the total amount of US Government Revenues that could be raised here has to be just huge.
When you consider that the above example resulted in $7,920 of higher US federal income taxes in just one year for just one highly-paid executive, the total amount of US Government Revenues that could be raised here has to be just huge.
But to be totally fair, I would scale in the elimination of this egregious tax loophole, and thus the amount of this tax loophole elimination would increase as Adjusted Gross Income above $250,000 increases, but for sure, anyone with Adjusted Gross Income above $1 million should have his/her entire health insurance compensation be taxable starting in 2013.
And going back to the driving test between choices in solving the US Debt Reduction Sequester Solution, the elimination of this tax loophole for just those making more than $250,000 will result in absolutely no US full-time jobs lost.
Furthermore, I think it would be unconscionable for the US Congress to pass a reduction of Medicare Benefits in order to either solve the US Debt Reduction Sequester Solution/Grand Bargain, and at the same time, to permit very wealthy individuals to continue to exclude from their US federal taxable income the huge amounts of employer-provided health insurance compensation they receive each year.
If this were to happen, I think you would have an incensed retirement and near retirement communities.
Also if this were to happen, I think that retirees could logically conclude that their reduced Medicare Benefits are in essence paying for the large tax loopholes received by the younger very wealthy Americans from their tax-free employer-provided health insurance compensation.....in essence, a massive transfer of after-tax health care wealth from older Americans to the very wealthier, much healthier, younger Americans.
