Google to compensate for “Gay Health Insurance Tax”
July 1st, 2010
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.