[Bumped from late yesterday afternoon. Kinda important issue, but our local media likes to ignore McDermott and pretend he doesn’t do anything important.]
Sixty percent of Fortune 500 companies now offer domestic partner health care benefits, benefits, unlike those of married partners, that are currently fully taxed as income under federal law. But after a decade of pushing legislation to fix this inequity, and a who’s who of major corporations now coming to his support, Rep. Jim McDermott (D-Seattle) may finally be on the verge of passing the The Tax Parity for Health Plan Beneficiaries Act” (H.R. 2088) into law.
“It’s a matter of basic fairness,” Rep. McDermott explained by phone as he was boarding a plane, “But it’s also just good business.”
- Third Way
According to a May, 2011 study released by the think-tank Third Way, the average employee receiving benefits for a domestic partner pays an additional $1,717 in extra federal taxes, while the employer providing the benefit pays an additional $256 in payroll taxes. Such an employee earning $50,000 a year while receiving $10,000 in benefits for a domestic partner would pay income tax on $60,000 a year, for example, whereas a married co-worker receiving the same level of benefits for his or her spouse would only pay taxes on $50,000.
This not only creates a hardship for domestic partner families, it also places companies who provide such benefits at a competitive disadvantage, prompting 77 of our nation’s largest companies—including Alaska Airlines, Microsoft, Boeing and others—to send a letter in support of Rep. McDermott’s legislation under the aegis of the Business Coalition for Benefits Tax Equity. “This coverage and coverage for other non-spouse, non-dependent beneficiaries helps corporations attract and retain qualified employees and provides employees with health security on an equitable basis,” the letter argues. “Unfortunately, federal tax law has not kept pace with corporate change in this area, and employers that offer such benefits and the employees who receive them are taxed inequitably.” In fact, Google has found these benefits so crucial that it now increases the pay of recipients to make up for the tax penalty.
Rep. McDermott first introduced the bill back in 2001. “My approach is to put a stake in the ground with the best public policy possible, and then look for a vehicle to ride.” That opportunity came in 2010 with health care reform; the tax parity provisions actually made it as an amendment on the House version of the bill, only to be stripped out in the Senate without explanation. “It doesn’t make sense, Rep. McDermott complains. “Nobody is ever very specific” in their opposition, there’s just a “generalized feeling” that it somehow promotes gay marriage.
Josh Friedes, executive director of Equal Rights Washington says that his LGBT community deserves some of the blame of for failing to generate the support necessary to pass the legislation. “We haven’t done a good enough job of educating the public about the impact of the gay tax penalty,” says Friedes, pointing to some same-sex partners who have to turn down health care benefits simply because they can’t afford the extra taxes. “Most of our heterosexual peers are simply unaware of the increased taxes we pay.” If they understood the issue, even many conservatives would support the bill, Friedes believes. “They may be uncomfortable with gay marriage, but they believe in tax equity.”
And with big business now backing the bill, including Dow Chemical, the biggest business in House Ways and Means Chair Dave Camp’s (R-MI) home district, Rep. McDermott feels the momentum moving toward passage. “There’s going to be a Tax Reform Bill this year,” Rep. McDermott predicts. “That’s the vehicle we’re going to use to get tax parity passed.”
And when that happens, Friedes says, the LGBT community will owe Rep. McDermott a huge debt of gratitude. “People don’t realize how close we came, and how incredibly hard he’s worked on this issue. Jim McDermott is an unsung hero.”
That, plus he was the first to be willing to shift district lines a bit, in our game of musical chairs we call redistricting.
Jim’s a great guy.
I miss working for him. Jim McDermott isn’t the loudest liberal progressive, but it’s hard to beat him for accomplishment, or for consistently being in the right.
DOA in a GOP house.
“Conservatives” cannot both say that marriage is a Sacrament between a man and women, but then go and attach legal, secular privileges to it.
I’m missing why this is good legislation.
Employer provided health insurance is an accident of labor relations history. We ought to get rid of it, not enhance it.
An employee without a partner or dependents is not getting the same compensation as a co-worker who is getting “free” or discounted benefits for a partner. Self employed people have to buy insurance with after-tax income.
Expanding a tax loophole to cover more people does not make the loophole fair and it is bad for the economy if you think entrepeneurs and start-ups are good for the economy.
Maybe I just didn’t read closely enough, but is this the case for long-term heterosexual partners as well?
@3 is sadly correct. It is a great piece of legislation, and McDermott has rightfully been pushing for this for several years. But with a Republican majority in the house, this will go nowhere.
I hope I’m wrong, though. My partner and I pay about $4000 a year in extra taxes because of this very issue.
@5 I agree with that sentiment. This appears to be just another complication in an already screwed up situation. Rather than fix the problem of employer based health care coverage, this just adds another layer that has to be undone later, when the whole system fails under its own weight.
Nevertheless, I’m still proud of Baghdad Jim!
@6 – yes. I pay additional taxes on my different sex partner since we are not married but qualify for my works DP program.
If the republicans vote against it, we can ask them why they oppose a tax cut. In fact, we should persuade some liberal groups to oppose this on the grounds that highly paid workers will benefit disproportionately, since they are likely to have both more valuable coverage and a higher tax bracket. If the libs are against it, surely the repubs would fall over themselves to approve it.
If my employer ( the federal government) would give my partner health insurance, I’d be thrilled about this bill, too.
@7,
I and my partner have been paying this penalty for decades. Not only that, but this year the IRS required us to file as individual owners of “community property” (not required by married couples) because we are registered Domestic Partners – another tax penalty totaling in the hundreds of dollars.