Social Policy & Politics Program | Idea Brief

Eliminating the Tax Penalty on Health Insurance for Domestic Partners

by Lanae Erickson Hatalsky and David Kendall

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While our country continues to evolve in its views towards gay and lesbian couples, our tax code lags. For example, businesses now routinely offer family health care benefits to domestic partners and same-sex couples who are allowed to marry under state laws, but federal tax law punishes both the businesses that offer these benefits and the employees who use them. It treats the value of these benefits as income, forcing the employer and the employee to pay extra taxes that would not apply to other couples. Not only does this cost more for everyone, it is convoluted to administer, since businesses must keep a separate set of books for employees with a same-sex partner in order to calculate these added taxes—including payroll taxes. Simply changing the tax code to put health coverage for domestic partners on the same footing as coverage of other family members would remove this headache for employers and ensure that all employees are treated equally and can receive the protections they deserve.


The Tax Penalties and Bureaucratic Burden of Domestic Partner Health Insurance (Click for JPG version).
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