In contrast to benefits acquired through heterosexual marriage, the federal and most state governments treat dependent benefits for domestic partners as taxable earned income, placing an extra tax burden on gay and lesbian individuals who receive health care coverage through their employer. As a result, gay people pay $1,069 per year more in taxes than would a married employee with the same coverage. Collectively, “unmarried couples lose $178 million per year to additional taxes” and U.S. employers “pay a total of $57 million per year in additional payroll taxes because of this unequal tax treatment.”
Well today those numbers will decrease, if ever so slightly. Google has announced that it will begin covering the cost of the extra tax that heterosexual married couples do not pay:
“We said, ‘You’re right, that doesn’t seem fair,’ so we looked into it,” Mr. Bock said. “From that initial suggestion, we said, let’s take a look at all the benefits we offer and see if we are being truly fair across the board.” As a result, the company also decided to make a few other changes that would help gay employees, including eliminating a one-year waiting period before qualifying for infertility benefits and including domestic partners in its family leave policy — going beyond the federal Family and Medical Leave Act, which requires employers to provide up to 12 weeks’ leave in a one-year period to recover from a medical condition or to care for a relative.
The extra compensation to cover the domestic partner tax will apply only to same-sex domestic partners, Mr. Bock said, because heterosexual couples can avoid the added tax by marrying. (Same-sex couples can make their unions official in several states, but their relationship will not be federally recognized.)
The additional pay will also cover the dependents of the employee’s domestic partner. The changes will be retroactive to Jan. 1, and will apply only to workers in the United States.
Google is not the first company to pay for the benefit — “according to the Human Rights Campaign, a handful of other organizations, including Cisco, Kimpton Hotels and the Gates Foundation, do so as well” — but the experts NYT spoke to predict that “given the competitive nature of the benefits culture in Silicon Valley, where companies often offer extra perks to attract top employees, Google’s decision could lead to policy reviews.”
Indeed, a domino effect would not only alleviate the extra tax burden on LGBT employees, but it would also help the country move closer towards universal coverage. According to a recent study published in Health Affairs, the extra tax burden results in lower levels of insurance for partnered gay and lesbians as compared to their heterosexual counterparts. “Partnered gay men are less than half as likely (42 percent) as married heterosexual men to get employer-sponsored dependent coverage, and partnered lesbians have an even slimmer chance (28 percent) of getting dependent coverage compared to married heterosexual women.”
Ultimately, Congress has to extend the employer-coverage tax exclusion to domestic partnership benefits. The House version of the health care bill included this provision, but it was ultimately kept out of the final legislation.