by Congressman Sam Graves
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For many of us, healthcare coverage is something we don’t think about until we have to schedule a surgery or buy an expensive prescription drug. That’s because most Americans get their health insurance through an employer’s plan. While this system might work well for approximately 75% of workers, the costs are far greater for millions of Americans without employer sponsored coverage, including the self-employed.
Decades ago, the IRS encouraged employer sponsored coverage by ruling that non-cash benefits to employees, such as health insurance and dental coverage, are not considered as income for tax purposes. The law also allows employees to pay their share of health insurance premiums using pretax dollars, which shields these payments from income and payroll taxes effectively lowering a worker’s income subject to tax.
However, this benefit does not apply to the millions of Americans who are self-employed or are not offered employer sponsored coverage. These Americans are required to purchase health insurance with money that has already been taxed. Only expenses that exceed 7.5% of a person’s adjusted gross income (AGI) are deductible on income taxes, but not payroll taxes. Despite the high cost of health care, few people spend enough to qualify for the deduction.
Essentially, these taxpayers are required to pay more for the same insurance others get from their employers. It’s time for the discrimination to end.
A number of proposals have been put forward to create a more equal playing field for workers without employer sponsored coverage. One bill I have cosponsored, the Healthcare Freedom of Choice Act, completely eliminates that 7.5% AGI requirement and allows all taxpayers without employer sponsored coverage to fully deduct all out-of-pocket medical expenses, including premiums.
States like Missouri are leading the way toward health reform and the federal government must do its part to ensure these endeavors are successful. It is simply unfair to the millions of uninsured and self-employed that they do not receive the same treatment as those with employer sponsored health insurance.