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Google to compensate for “Gay Health Insurance Tax”

Timothy Kincaid

July 1st, 2010

The gay health insurance tax is such an odd, unfair, and blatantly discriminatory tax that many heterosexuals have difficulty understanding it – or even believing that it exists. Here’s how it works:

Suppose Joe and Susan are married. Joe has a job with great benefits and Susan works part time as a freelance artist so they take advantage of Joe’s health plan to cover Susan and their two children. The company pays the premiums and everyone is happy.

But if Joe is Janet, the rules change. Janet works at a great company which does not discriminate between gay and straight couples. It recognizes her marriage to Susan and provides health coverage to Susan and their two children just as it would if Janet were Joe.

But now the federal government pops its head in to object. For tax purposes, family benefits are not considered part of your taxable income. Unless you are a same sex family, in which case the federal government says that you are not a family at all. If you are a same-sex couple then you have to pay the Gay Health Insurance Tax.

“Susan is not a relative,” they say. “She’s just some random stranger who is being covered by your health plan. And these kids are her children, not yours.” So, as Susan is not Janet’s spouse according to federal law, they do not treat the health insurance premiums which cover Susan and the kids as family benefits.

“This is income,” they say. Just as any other amount taken from your check and paid to a third party (say a creditor with a lien) is considered part of your income, so too are these insurance premiums paid to cover this other random non-spouse person considered part of your income.

And so they tax Janet. Assuming that Janet is in the 35% tax bracket, her wonderful company may give her coverage for Susan for which they pay premiums of $500 per month, but the IRS gives her a tax bill for $175. So while Joe and Janet may do the same exact work and receive the same exact pay, Joe takes home an extra $2,100 per year.

Now some companies are seeing this as unfair. They support the idea of equal pay for equal work and are stepping in to make up the difference. The latest (and largest) is Google. (NY Times)

On Thursday, Google is going to begin covering a cost that gay and lesbian employees must pay when their partners receive domestic partner health benefits, largely to compensate them for an extra tax that heterosexual married couples do not pay. The increase will be retroactive to the beginning of the year.

This is great news for Google’s gay workforce. But it is also good news for those who work at other companies, especially those with whom Google competes for skilled high tech employees.

But 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, experts said.

“It could have a ripple effect, prompting other employers, and particularly employers in the same industry, to take a look at their own benefits package and see whether it would be appropriate to extend those benefits,” said Kathleen Murray, principal in the health and benefits consulting business in San Francisco for Mercer, the consulting firm. “When you have a high-profile company doing anything, that tends to get into the mind of the culture, and it can have a more diffuse effect.”

And as more companies begin to recognize the special gay health insurance tax levied specifically at gay couples, the more the public becomes aware of this bizarre inequality and the easier it becomes to get it changed. A provision which would eliminate the tax was at one point part of the health care reform but did not make it to the final bill.

It seems that some of our representatives believe that gay people should pay higher taxes than heterosexuals. Ironically, they are the ones that you often hear calling for tax cuts… just not for us.

Comments

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Guffey
July 1st, 2010 | LINK

This is such a confusing issue that I’ve known gay couples who use company health benefits and don’t realize how much they are paying for it. In fact, I’ve talked to some HR reps at our (Fortune 100, very very large) company who don’t realize it.

So I hope, hope, hope Google does create a ripple. I have to give them credit for this – big big credit. With insurance costs these days that “tax” is significant – your example is right on, I pay roughly ~$2100 a year for my wife’s benefits.

Peter Ould
July 1st, 2010 | LINK

I’m trying to get my head around this (and I know that with US Federal tax that’s quite hard). Let me spec out the scenario as I think you’re describing.

i) The two couples are both “married”. For the purpose of clarity, I’m presuming it doesn’t really matter whether the marriage is a legal marriage or a legal civil union.

ii) The Federal Government’s view as regards tax is related to the fact that the Federal Government doesn’t recognise same-sex marriages or civil unions? Is that right? I’m presuming this is not an issue to do with whether the children of one of the parents are not the biological children of the other (i.e. that it wouldn’t matter for tax purposes in a heterosexual marriage whether the children who benefit from the health care plan are or are not the biological offspring of both parents)?

iii) I presume that under the Federal tax system an unmarried straight couple would be treated exactly the same as the married gay couple?

iv) I presume, despite your wording, that this is NOT a specific tax on gay couples, rather they are simply disadvantaged because Federal Government doesn’t recognise their marriage?

Timothy Kincaid
July 1st, 2010 | LINK

Peter,

Points i) and ii) are correct.

But iii) is not exactly correct. An unmarried straight couple would likely not receive spousal benefits from their company. And if they did, as Google said, they can get married and avoid the tax.

iv) this is disingenuous. A tax which only is assessed to gay couples IS a specific tax on gay couples.

Of course the reason the tax is only on gay people is because the feds only refuse to recognize the marriages of gay people. That is the method of the Gay Health Insurance Tax, not the justification for it.

Peter Ould
July 1st, 2010 | LINK

Re (iii) – If an unmarried straight couple received the benefits then they would be taxed in a similar manner?

We avoid this issue in the UK because Civil Partnerships are a nationally recognised institution in both Kingdoms, the Principality and the Province. It is illegal to treat someone in a Civil Partnership differently to someone in a marriage.

Surely the real issue is that in the US individual states can create their own legislation on marriage? I sympathise (I really do) but the problem is caused by your constitutional settlement, not any bias on the side of the Federal Government.

Timothy Kincaid
July 1st, 2010 | LINK

Peter,

Things are different here than in the UK. Our federal government does not recognize any same-sex couples, whether legally married, civilly unioned, or domestically partnered.

Had the federal government not passed a law specifically restricting its marriage recognition to exclude gay couples (DOMA) then it would have recognized marriages where states recognized marriages. Until DOMA, states were the ones to decide who was or was not married.

DOMA was based solely on anti-gay bias. No one pretended otherwise.

This year, legislators attempted to change the IRS rules for health insurance. It was pulled from the health care bill solely due to anti-gay sentiment.

This tax is based on bias. If it were not for anti-gay bias, it would have been corrected years ago.

tina
July 1st, 2010 | LINK

Thanks for getting this out there Timothy.

You’ve spelled it out clearly and succinctly.

I was surprised a while back when my friend told me not to get too excited over partner benefits- she’d just gotten slapped with the Gay Health Ins Tax!

(will i ever CEASE to be surprised? … America- with Liberty and Justice for All. I just default to that. And, I’m dismayed & surprised everytime I realize that it isn’t… yet)

Okay, I’m sharing this on facebook. Keep up the excellent reporting!

Eric in Oakland
July 2nd, 2010 | LINK

I think that the main reason this inequality has not been corrected is because most people aren’t aware of it. Last year I had a discussion with my company’s HR Manager and President about this and neither believed me until I proved it. They both assumed that because California law treats my relationship the same as that of a married straight couple that no legal inequalities could exist.

Peter Ould
July 2nd, 2010 | LINK

But, and I really am not trying to be biased here, the issue is down to your constitutional settlement and the “innovation” (I use the word in its technical sense) of gay marriage / civil union. The Federal Government has never recognised marriage outside of the specifics of one man and one woman (so for example, Deseret/Utah never got to even think about being State until it banned the practice. Like it or not, there is not as yet a majority across the States in favour of the innovation, so rightly the Federal Govt has not as yet recognised it.

The solution is obvious. You should all acknowledge the sovereignty of her Majesty Queen Elizabeth II, Queen of the United Kingdom of Great Britain and Northern Ireland and the American Colonies. Once you all became British citizens and subjects of the Queen you would then be under the jurisdiction of her Majesty’s Parliament which has voted to recognise Civil Partnerships and give them equality in law with marriage. Problem solved. Simples.

Emily K
July 2nd, 2010 | LINK

Like it or not, there is not as yet a majority across the States in favour of the innovation, so rightly the Federal Govt has not as yet recognised it.

Actually, a majority DO support “some form of recognition” for same sex couples. It’s the word “marriage” that has a way to go. Our “innovation” as you put it does indeed have support.

And although the Federal Gov. is supposed to support the people, they do have a right to make moral decisions that are unpopular – such as recognizing the civil equality of all law abiding, tax-paying citizens.

Peter Ould
July 2nd, 2010 | LINK

But this is what I mean Emily. The Federal Govt clearly have a right to make that decision, they just haven’t done so yet. QED – the problem is created by your constitutional settlement and not an anti-gay bias per se.

Other Fred in the UK
July 2nd, 2010 | LINK

Peter, as far as I am aware prior to the passing of the Federal Defence of Marriage Act, the Federal Government had never refused to recognise marriages recognised by the States (with the exception of specific couples suspected of being sham-marriages for the purposes of immigration). The fact that Utah was not allowed into the union until it had outlawed polygamy, precisely shows that the Federal Government of the time did not want to break the convention of recognising marriages recognised by the States. This convention has remained despite the variety of marriage laws of the states e.g. first cousin marriage. When Congress passed the Defence of Marriages act it specifically and deliberately broke this convention. I understand that the Commonwealth of Massachusetts is suing the Federal Government because it considers that the Federal Government infringed its constitutionally protected rights by breaking that convention.

As attractive as your solution is, I suspect it may fall on particularly deaf ears at this time of year.

Priya Lynn
July 2nd, 2010 | LINK

Peter, what’s this constitutional settlement you keep going on about? It’d be nice if you’d speak in plain english instead of using sillyness in its place such as referring to equal marriage/civil unions as “innovations”.

Peter Ould
July 2nd, 2010 | LINK

Priya,

I specifically said I was using the word “innovation” in its technical sense – something this is innovative. If you want to assume that I am applying it as a pejorative then you have failed to read my comments properly. As for “constitutional settlement”, perhaps Google is your friend? It’s certainly much easier to just use two words rather than constantly writing “the way over the past 250 years your country has ordered and adapted the relationship between the government of the individual states and the federal authorities”.

Fred,

I think you raise an interesting point. Clearly since DOMA is still on the statute book there is not as yet a majority in Congress to repeal it. I’m interested though by your exploration of the Utah issue. If there was a convention that federal government shouldn’t interfere in the marriage laws of the individual states, surely that convention was first violated by the 1967 Federal Acts outlawing States’ racist miscegenation laws? In that case the Federal Govt acted to overturn the States’ marriage laws as they currently were. While we might argue about the morality or otherwise of such a decision, surely the constitutional convention at that point became that the Federal Govt could overturn State law if it was immoral. Now, how would that work out if Congress believed gay marriage was immoral?

Priya Lynn
July 2nd, 2010 | LINK

Peter I never said you were using “innovation” as a pejoritive. Its just dumb to use a word without a readily apparent meaning rather than the ones that have obvious and easily understood meanings.

I used to write technical documentation as part of my career. One thing I learned early on is that if you want to be understood you should never take the easier way out of using two ambiguous words over a complete, if wordy, explanation. Of course maybe you are less concerned with being understood than trying to appear clever.

Other Fred in the UK
July 2nd, 2010 | LINK

Peter, I don’t know what 1967 Federal Acts you are referring to. Are you thinking of the Supreme Court of the United States case, Loving v. Virginia of the same year? My argument is that there was a convention that the Federal Government would recognise marriages recognised by the states, however that does not supersede the Constitution itself. In Loving the court ruled that the Virginia “Racial Integrity Act” of 1924 violated Mr & Mrs Loving’s rights enshrined within the Constitution. In my opinion, it does not follow that the Executive or Legislative branches of the Federal Government can ignore marriages recognised by the states on the grounds of immorality because the Judicial branch overturned certain marriage laws on the grounds of unconstitutionality.

Pender
July 2nd, 2010 | LINK

“While we might argue about the morality or otherwise of such a decision, surely the constitutional convention at that point became that the Federal Govt could overturn State law if it was immoral. Now, how would that work out if Congress believed gay marriage was immoral?”

The Supreme Court overturned laws against interracial marriage. It’s different from Congress, since it interprets the Constitution, and the Constitution — unlike statutory law enacted by Congress — is the supreme law of the land, not subject to the constraints of a vertical separation of powers.

To the extent you’re expecting to receive a full course on American government and jurisprudence in the comments section of a blog, or to the extent you believe you have interesting observations to offer about the historical consistency of United States jurisprudence WITHOUT such basic background knowledge, you’re laboring under something of a misapprehension. And while speaking from a position of ignorance is never praiseworthy, it’s particularly unfortunate when your stream of consciousness (perhaps inadvertently) trivializes the equality of a minority in the process.

In other words, this is not a productive conversation. You need to learn a lot about the United States government before you can expect to opine intelligently on the subject.

Peter Ould
July 2nd, 2010 | LINK

You’re absolutely right that I was referring to Loving vs Virginia and not to the repeal of the miscegenation laws by the individual states themeselves.
Thank you Priya and Pender for responding to my mistake in such a generous, graceful and un-insulting fashion. You’ve certainly put me in my place. Well done you.

Priya Lynn
July 3rd, 2010 | LINK

I’m sorry Peter, I know everyone should respond to another person’s arrogance with polite deference.

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