Time To End The Double Taxation On Domestic Partners

April 15th brings a visceral reaction to Americans everywhere. No matter how rich, poor, successful or struggling, Tax Day equalizes us all. Well, not quite all of us.

Health care in America is an expensive necessity. Employee health benefits, which are taken for granted by many workers, were offered to 60% of Americans in 2007, the vast majority of employers also providing coverage for the employee’s spouse and dependents. Of those who are uninsured, however, almost 70% are from families with one or more full-time workers. Some families are clearly being left out.

Domestic partners are some of the biggest losers in the employer-provided heath care system. Only 22% of employers cover same-sex partners of employees, while 28% cover different-sex domestic partners. This issue boils down to more than civil rights.

This issue is one of taxes and economics.

When an employer provides health insurance for an employee’s spouse, federal tax law allows the value of the health insurance coverage to be excluded from the employee’s gross income. In short, these heath benefits are not taxed.

The same is not true of domestic partners.

Domestic partner health benefits ARE treated as taxable income, both on the employer, and the employee, balance sheet. According to a December 2007 report by the Center for American Progress and the Williams Institute, employees with partner health benefits now pay on average $1,069 per year more in taxes than would a married employee with the same coverage — that’s 11% of taxes paid by the average single taxpayer. If you’re in an upper tax bracket, that additional tax burden could be as much as $1,800 per year, and with 53% of Fortune 500 Companies currently offering domestic partner benefits, this gross injustice is a reality to countless American workers.


And who has been a more long-standing champion of lower taxes than the conservative founder and president of Americans for Tax Reform, Grover Norquist? Even Norquist agrees, domestic partners should be treated equitably.

The tax code shouldn’t be about picking winners and losers, or making social policy. If people want to get married, great. If they want to cohabitate, fine. If they’re gay, that’s ok, too. The tax code should treat these households neutrally and equitably.

Many domestic partners still choose to take advantage of these benefits — they crunch the numbers and determine that the extra taxes are still preferable to purchasing independent coverage, despite the fact that extra taxation can result in a 50% increase in Federal taxes. But the facts add up in a simple math problem:

$178 million more per year in taxes paid by employees+$57 million more per year paid by employers=$235 million more per year that workers and businesses pay in additional taxes

This is only .01% of the total cost to the federal government of the current health benefit payroll tax exclusion.

Legislation exists in Congress to correct this error. In both the US House and Senate, the Tax Equity [for Domestic Partners and for] Health Beneficiaries Act would amend current law so that domestic partners are taxed in the same way as married couples. Support for these measures is far-reaching. Businesses, understanding the complexities of this issue, have stated that they “recognize that the provision of domestic partner health coverage is an essential component of a comprehensive benefits package. This coverage helps corporations attract and retain qualified employees and provides employees with health security on an equitable basis… These higher tax levels can lead employees to decline the domestic partner coverage, contributing to the problem of the uninsured.”


Unions, seeing how this legislation impacts their members, agree that, “It is a sad irony that the continuation of this discriminatory tax policy both increases the middle class tax burden and decreases the number of those covered by health insurance — situations that have received well-deserved attention by bipartisan majorities in both Houses.”

Even Conservative members of Congress, such as Gordon Smith (R-OR), believe in the necessity in this “important piece of legislation” when he explained during a Senate press conference that, “As a republican I believe in low taxes. As a human being, I believe in people getting healthcare, and we’re trying to do that… This is a right that we need to wrong, and this is one small piece in the larger fight for equality.” Watch it:

In fact, 20 members of the Senate have moved to support this legislation by consponsoring the bill.

And of the three remaining presidential candidates, guess which one hasn’t taken that step: John McCain. Despite what you might think, this is surprising. McCain is pro-business, anti-tax, and pro-CEO.