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Letter to the Senate HELP and Finance Committees Opposing Proposals to Tax Employer-Sponsored Health Care Benefits

March 24, 2009

Dear Senator:


The 3.2 million members of the National Education Association (NEA) are pleased that Congress is engaging in debate on health care reform, with the goal of ensuring that every person in America has quality, affordable health care coverage.  We look forward to working with Congress to advance this crucial goal. 

We are writing to express our strong opposition to the proposed idea of capping or eliminating the tax exclusion for employer-sponsored health coverage, and we urge you to oppose such a change.
 
Over the course of their careers, many public education employees have traded salary increases for the long-term security of a comprehensive health plan.  Telling hard-working public school educators that benefits will be cut or that they will pay more taxes would unfairly penalize them.  A tax on salaries above a certain amount would also be unfair to experienced educators who, after decades of dedicated service, have climbed to the top of their salary schedules.  Limiting or capping the tax exclusion for health benefits could have a disastrous effect on public education by discouraging highly qualified workers from entering or staying in the profession. 

Eliminating or capping the tax exclusion would also remove a key incentive for employers to provide coverage.  In addition, taxing benefits would encourage younger and healthier workers to pass up employer-sponsored coverage and seek less expensive, less comprehensive coverage.  The loss of these workers to employer risk pools would drive up the cost of coverage for older and less healthy workers.  It would also increase their tax burden. 

Taxing benefits would undermine the quality of coverage by driving highly-paid employees with higher marginal tax rates to demand that employers reduce coverage.  While such employees may be able to afford high deductibles and reductions in coverage, it will be a financial burden for average families. 

Finally, capping or eliminating the tax exclusion would place the burden more heavily on some workers than others.  Coverage is more expensive for employers whose workforces are older or female-dominated such as education.  Premiums vary by geography and by industry.  Coverage costs more for small employers, compared with large employers.  It is inequitable to tax workers more, for the same coverage, because of who they work for, what they do or where they work.

Given these strong concerns, we urge Congress to reject any proposed changes to the existing tax exclusion for employer-sponsored health benefits. 

Sincerely,

Diane Shust
Director of Goverment Relations

Randall Moody
Manager of Federal Advocacy