Taxing Illness: Michigan lawmakers are going out on a limb to alleviate a
state budget crisis: One proposal aims to include health benefits as taxable
income. The proposal, said to be the first of its kind, would increase a
person’s taxable income by as much as $12,000 depending on the type of health
coverage he or she has.
The proposal is meant to soften the blow of a tax hike. By taxing health
benefits, lawmakers would only have to raise taxes to 4.3 percent, up from 3.9
percent but not as high as a proposed increase to 4.6 percent that would not tax
benefits. Tax deductions on health benefits have traditionally been a way to
encourage employers to offer coverage.
Earlier this year, President Bush proposed giving individuals who purchase
health benefits a tax break similar to those offered to employers to help
Americans wean themselves from their dependence on employers for health
care.
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