Growth in the Exclusion of Employer Health Premiums

Research Report

Growth in the Exclusion of Employer Health Premiums

June 27, 2005

Abstract

The employer exclusion of contributions for medical insurance premiums and medical care from employee income taxes is the single largest tax expenditure in the federal budget, worth $112 billion in fiscal year 2005. Even when adjusting for growth in medical prices, the employer exclusion still grows in real terms between 1988 and 2002 (a 36 percent rise). Yet, as health tax expenditures for employer-sponsored insurance have grown, the uninsured population has also grown, both in absolute numbers and as a percentage of the nonelderly population.

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