The Tax Equity for Health Plan Beneficiaries Act and

Domestic Partner Health Benefits Equity Act

There are currently two bills before Congress regarding the inequity of taxing domestic partnership benefits:  The Tax Equity for Health Plan Beneficiaries Act (HR.935) and the senate co-bill, Domestic Partnership Benefits Equity Act (S.1702).   The House bill was introduced by Jim McDermott (D-Wash) on Feb. 26, 2003 and is currently with the House Ways and Means Committee.   The senate bill was introduced by bi-partisan cosponsors (Senators: Smith (R-OR), Chafee  (R-RI), Graham  (D-FL), and Boxer (D-CA)) on Oct. 2, 2003 and is currently with the Senate Finance Committee.

The two bills before Congress would amend the Internal Revenue Code to end the taxation of health insurance benefits provided to domestic partners, and treat them the same way as health benefits provided to married couples and other dependents.   The bills do not require the provision of domestic partner benefits, they simply remove the tax liability from domestic partnership benefits.

The inequity arises in the following way.   Under federal law married (i.e. heterosexual) employees do not pay taxes on their employers’ contribution for health insurance costs, but people with domestic partners (LGBT employees) do.   Those who cannot afford the extra taxes are often forced to go without health coverage for their domestic partners.   In addition, employers who provide health coverage for domestic partners are taxed at a higher rate as their payroll taxes are based on their employees’ taxable income.   Here is an example of how this inequity works.   A married man with an income of $40,000 a year pays taxes on $40,000, but someone with a $40,000 income and a domestic partner who’s health insurance costs $200 per month is taxed on $42,400 – 12 months times the health benefit plus the original income.

For more information on these acts see The Tax Equity for Health Plan Beneficiaries Act (H.R. 935) and Domestic Partner Health Benefits Equity Act (S. 1702)