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Healthcare Bill Would Remove Gay Tax Inequity


So, the House has passed the long-awaited healthcare reform bill, and Speaker Nancy Pelosi is basking in congratulations. Good for her, and good for the country. It may even be good for partnered Lesbians and Gay men.

The New York Times points out today that the House bill contains a provision to remove a little-known injustice in the tax code that penalizes Gay domestic partners, where one gets health insurance through the other’s employer:

As a high-priority bill for Congressional leaders and President Obama, the legislation has become a vehicle for many other initiatives large and small.

Supporters of gay rights have long been trying to change the tax treatment of health benefits provided by employers to the domestic partners of their employees. In effect, such benefits are now treated as taxable income for the employee, and the employer may owe payroll taxes on their fair-market value.

Under the bill, such benefits would be tax-free, just like health benefits provided to the family of an employee married to a person of the opposite sex.

Representative Jim McDermott, Democrat of Washington, who proposed the change, said it would “correct a longstanding injustice, end a blatant inequity in the tax code and help make health care coverage more affordable for more Americans.”

Joseph R. Solmonese, president of the Human Rights Campaign, a gay rights advocacy group, said federal tax law had not kept up with changes in the workplace.

“I meet people all the time who are gratified they work for companies that offer domestic partner benefits,” he said. “But they pass on the benefits because they cannot afford the taxes that go with the benefits.”

M. V. Lee Badgett, a labor economist at the University of Massachusetts, Amherst, said employees with domestic partner benefits paid $1,100 a year more in taxes, on average, than married employees with the same coverage.

This is just one of over a thousand tax breaks written into the IRS code favoring people who are legally married. I have no problem with those subsidies—but they should be applied equally.

Consider why the marriage privileges were inserted into the tax code in the first place: not just because of religion or because “the family is the building block of society,” a grandiose and untested claim treated as if it was common knowledge, but because, all other things being equal, committed relationships are more stable than ones without measurable commitment. Tons of research show that marriage leads to favorable social outcomes; married people live longer, and that’s only the start of the benefits.

That means we should want as many people married as possible, including the Gay ones. Yet Congress provides financial incentives for Straight ones only, while the Gay people have to pay.

Thus the state-by-state strategy on Gay marriage has a built-in flaw. Though marriage laws are administered by each state, it’s the Federal benefits for married people that cost big Gay money.

As helpful as it is that last Tuesday Oregon voters agreed to eliminate all state inequities for domestic partners, state taxes are not the biggest bite in Gay paychecks. The IRS and Social Security eat big chunks. Those are Federal programs. And the Feds have a “Defense of Marriage” Act that writes discrimination into law.

All 50 states could do what Oregon has done—”Gay marriage without calling it that”—and it wouldn’t make much of a financial difference. Most tax money goes to the national government.

The Feds’ biggest wallop in your wallet is the inheritance tax. Being a legal “spouse,” or not, makes all the difference in the world. Being Lesbian or Gay can cost you millions.

And the IRS couldn’t care less that you were together for 50 years, that you worked to put your lover through law school, or that you provided tender loving care all the time that s/he was sick, only to be kicked out of the hospital room by some unknown aunt from New Jersey. All the IRS wants to know is “spouse or not.”

This may not matter to you when you’re 25, penniless and in love, but it will matter a great deal when you’re 75, with a lifetime of assets you worked for, and widowed.

LGBT leaders need to do a lot better job of illustrating the built-in inequity of DOMA as applied to the tax code. We did it earlier with the “kicked out of the hospital room” scenario, which has resonated with fair-minded people. Now let’s defend Uncle Harold, forced to sell the condo at 75 to pay the taxman.

Let’s accept that, as in Maine and California, the #1 weapon of anti-Gay marriage politicians is “protect our children from queers in school.” Since the whole wingnut conspiracy machine is geared to stoke heterosexual fears (and always has been since the days of the Briggs Initiative and Anita Bryant, as depicted in the film “Milk”), we need to do more than get sarcastic when opponents suggest that teachers will take 6-year-olds on a field trip to a Lesbian wedding. Of course the claim is ludicrous, but we know that will be the battleground, so let’s pre-empt it. The Lesbians at the wedding are not zoo animals to be petted, and Mrs. Palmer’s first grade class ain’t invited.

Write a schools exclusion into the Gay marriage bill.

If homosexuality was catching, the entire country would have it by now.

It can’t be infectious, because there’s nothing you can do once a teenage boy discovers girls. Heterosexuality cannot be cured.

It’s not like preachers and whacked-out shrinks haven’t tried; imagine the Straight women who would give anything for a little purple pill that turned down the testosterone level at home and in the office. Straight men are incurable!

But their spouses shouldn’t have tax benefits no one else gets; that’s unfair.

Congress and the IRS should not make Uncle Harold sell the condo.

Kudos to Rep. Jim McDermott for chipping away at heterosexual subsidies enforced by the IRS. The man isn’t famous but he just helped a lot of people.


From here the action shifts to the Senate. A lot can still go wrong, but Pelosi corraled the Democrats for President Obama, and healthcare reform now has the momentum.++


One Response

  1. Onward! Thanks Josh for this important note.


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