Legislation to Remove Unfair Taxation of Health Benefits Puts Families First

by HRC Staff

Tax Parity for Health Plan Beneficiaries Act would remove discriminatory financial burdens on LGBT families

WASHINGTON - The Human Rights Campaign, the nation's largest lesbian, gay, bisexual and transgender (LGBT) civil rights organization, today thanked Reps. Jim McDermott (D-WA), Richard Hanna (R-NY), Earl Blumenauer (D-OR) and Ileana Ros-Lehtinen (R-FL) for putting families first by reintroducing the bipartisan Tax Parity for Health Plan Beneficiaries Act in the U.S. House of Representatives.  The bill, which was also introduced in the U.S. Senate earlier this year, would end the unfair taxation of employer-provided health insurance for domestic partners, as well as the penalty imposed on fair-minded employers who provide equal benefits to their LGBT employees.  On average an LGBT employee will pay $1,069 a year in federal taxes for employer provided spousal health care, according to the Williams Institute at UCLA.

The Tax Parity for Health Plan Beneficiaries Act addresses a fundamental flaw in the U.S. tax code.  Currently, employees are taxed on the fair market value of employer-provided health coverage for same-sex domestic partners or spouses.  The same employer-provided health coverage for opposite-sex spouses is excluded from the employee's gross income and no taxes are paid.  While a growing number of fair-minded companies “gross up,” or pay LGBT employees with dependent partners more to offset the tax burden, most do not.  Employees who elect to cover a domestic partner or same-sex spouse pay more income and payroll tax, and employers who offer benefits to domestic partners face the administrative burden of calculating taxes separately and also pay additional payroll taxes.

"Health insurance is critical to the stability of any family, and gay and lesbian couples shouldn’t be unfairly taxed," said HRC President Chad Griffin. "In removing a discriminatory tax burden, this legislation will make families stronger and will end the penalty imposed on fair-minded employers who provide equal benefits to their LGBT employees."

The number of major companies providing family benefits for domestic partners continues to rise. Currently, sixty-two percent of Fortune 500 companies offer these benefits as a matter of fundamental fairness. That is why a coalition of top employers like Dow, Corning, Chubb, IBM, Microsoft, Nike, and dozens more support ending the taxation of health benefits, and endorse the Tax Parity for Health Plan Beneficiaries Act.

“Tax inequality for gay and lesbian families is not only deeply unjust, it’s bad for businesses,” said Rep. Jim McDermott.  “LGBT employees lose significant income and employers are punished for making an ethical and competitive business decision. In a time when universal health coverage is our goal, it only makes sense to allow the private sector to easily cover domestic partners, especially when it helps families come closer to reaching the equal rights they deserve.”

“The Tax Parity for Health Plan Beneficiaries Act would lower taxes on American workers, families and businesses,” said Rep. Richard Hanna.  “Providing equity in how the government taxes health coverage is not only the right thing to do, but it also puts more dollars in paychecks and frees up capital for businesses to hire and expand in the United States.”

"I have been a long-time supporter of policies that help end discrimination and extend equal rights for all Americans,” said Rep. Ileana Ros-Lehtinen .  “It is unfair for an employee who elects domestic partner coverage to pay more income and payroll tax than an employee with a different-sex spouse. This bill demonstrates a strong bipartisan commitment to ensuring tax equality for all and I urge my Congressional colleagues to give this bill the serious consideration that it merits."

To see a full listing of businesses who have publicly stated their support for this legislation, go to: http://www.hrc.org/resources/entry/business-coalition-for-benefits-tax-equity-members

The Human Rights Campaign is America's largest civil rights organization working to achieve lesbian, gay, bisexual and transgender equality. By inspiring and engaging all Americans, HRC strives to end discrimination against LGBT citizens and realize a nation that achieves fundamental fairness and equality for all.

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