HRC applauds step toward eliminating unfair taxation

Wed. July 22, 2009 12:00 AM

Washington, DC - The Human Rights Campaign, the nation's largest lesbian, gay, bisexual and transgender (LGBT) civil rights organization, praised the U.S. House of Representatives Ways and Means Committee for voting early this morning to eliminate the unfair taxation of domestic partner benefits as part of the health care reform bill that they voted out of committee. The Committee voted 23-18 to send the full health care reform bill, which includes this provision, to the full House for consideration.

Under current law, although employer-provided health coverage for different-sex spouses is excluded from an employee's gross income, domestic partner benefits and coverage for same-sex spouses are not. As a result, an employee who elects to cover her domestic partner or same-sex spouse pays more income and payroll tax than a similarly-situated employee with a different-sex spouse. Moreover, because of this inequitable treatment, employers who offer benefits to domestic partners face the administrative burden of calculating taxes separately, and they also pay additional payroll taxes.

"This measure embodies responsible care reform because it eliminates a barrier to securing affordable family health insurance," said Human Rights Campaign President Joe Solmonese. "When we are talking about overhauling the system to ensure that insurance is affordable and available to all, it is simple common sense not to maintain a completely separate tax policy—one that makes health care cost as much as $1700 more per year—for certain working families," he added.

The provision included in the bill, which eliminates taxation of employer-provided coverage for any eligible beneficiary under a health plan, is based upon The Tax Equity for Health Plan Beneficiaries Act (H.R. 2625). This legislation was introduced in the 111th Congress by Representatives Jim McDermott (D-WA) and Ileana Ros-Lehtinen (R-FL). "HRC thanks Representative McDermott for his long-standing leadership on this important provision," said Solomonese. A companion bill in the Senate (S. 1153), was introduced by Senator Charles Schumer (D-NY).

Increasingly, major employers are providing family benefits for domestic partners. In fact, over 57% of Fortune 500 companies provide these benefits. That is why a coalition of top employers like Microsoft, Corning, Chubb, IBM and dozens more support ending the taxation of these benefits, and endorse H.R. 2625 and S. 1153.

"Because employers must pay payroll tax on these benefits, they are actually penalized for making a sound business decision to offer competitive health benefits plans," continued Solmonese. "Today the House Ways and Means Committee agreed that the tax code should not be second-guessing these employers' decision to cover all of their employees' families."

The Human Rights Campaign has been aggressively lobbying Members of Congress to support the inclusion of this provision in the health care reform bill. Also, on July 16th, 2009, HRC President Joe Solmonese sent House Ways and Means Committee Chairman Rep. Charlie Rangel (D-NY) a letter thanking the Chairman for his leadership and for including the domestic partner tax fix in the bill. In the letter, Solmonese wrote, "Removing the current tax penalties clearly advances the goal of expanding health insurance coverage. It also achieves equity in the availability of that coverage."

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.