Monday, December 20, 2010

The Taxing Matter of Health Care

At the end of 2009, five months before Max was born, I was laid off from my job in the publishing industry. I was naturally disappointed, however I considered myself very fortunate that my family would have the means to live on one salary for a temporary period of undeterminable length. Stewart and I decided that during that time-period I would be Max’s stay-at-home dad, which of course is what this blog is all about. One reason we felt we could do this is the fact that Stewart’s employer, as mine had, extended domestic partner benefits to committed same-sex couples. So the plan was that I, along with Max when he was born, would go on Stewart’s health care plan. I was pleased that as a gay married couple (married legally in Canada in February 2008) we had the same options that my heterosexual married peers have.

Little did I know, however, that same sex domestic partner benefits are not equal to the ones that married heterosexual couples receive. This is not the fault of employers, but of the federal law that does not recognize same-sex marriages -- even those legally entered into in a state or country that does recognize them.  Gay employees who are fortunate enough to work for employers that extend health insurance to domestic partners are unfortunate enough to be taxed on the value of that coverage — a tax that is not paid by their heterosexual married colleagues.  That is because, under federal law, employer-provided health benefits for domestic partners are counted as income if the partner is not considered a dependent.  The tax laws for who can be declared a dependant are very strict; for example, anyone who accumulates more than $3,650 of gross income in a year cannot be considered a dependant for tax purposes. Even unemployed, I do not fall into this category.

So tax is owed. The amount is based on the value of the partner’s coverage paid by the employer. As a result, employees with domestic partners will pay about $1,069 more a year in taxes, on average, than a married employee with the same coverage, according to a 2007 report by M.V. Lee Badgett, research director of the Williams Institute, which studies sexual orientation policy issues.  Given the escalating cost of health care, those numbers are estimated to be even higher now. So, despite my initial happiness that Stewart’s employer would extend benefits to me, it turned out that it was cheaper for me to elect to go on Cobra than it was for me to go on Stewart’s health plan.

Hopefully this baldly discriminating policy will change soon. In the meantime, some employers are recognizing the significant money crunch that the policy can unfairly foist on their LGBT workers, and are doing something about it. For example, last week I was very happy to hear Facebook announce that, beginning in the New Year, those employees whose same-sex domestic partners are on the company’s medical, dental or vision plans will be reimbursed by the company for the resulting federal tax hike that the government will be hitting them with. A spokesman for Facebook said that employees’ W-2 forms would be adjusted so that they wouldn’t have to pay for the extra tax.  In other words, their income will be increased just enough to cover the extra costs.

Facebook joins a small but growing number of large companies that are currently doing this, or are committed to doing so in the beginning of the new year, including: Barclays, Google, Cisco, Kimpton Hotels, Bain & Company and the Gates Foundation.  It is clearly the right thing to do, but it also makes business sense for them.  I am sure they recognize that in the ultra-competitive world of big business, talented LGBT job applicants will be more likely to sign on with them than their competitors, seeing these companies’ gestures as both a sign that their office environment is gay-friendly, as well as financially beneficial to them when comparing similar offers.

I think it is great that these big companies are making up this shortfall, but let’s face it: the law needs to be changed.  It is not these companies’ responsibility to foot the bill for basic equality over everyone else.  Gay employees working for any company should not have to shell out more to insure their spouses’ medical coverage than their straight colleagues.  That is lost money that could have gone towards many other things, including the care of their children, who are silent victims of this discriminatory law.  Unfortunately it is but one of many federal and state laws that show that married gay couples do not have rights equal to those of heterosexual married couples. While it is absolutely wonderful that Congress finally repealed “Don’t Ask, Don’t Tell” this past weekend, the gay community and its friends cannot grow complacent. There is still much to change, for the sake of basic equality and for the sake of the many LGBT-run American families not as financially fortunate as ours.


  1. This is insane. I had no idea.

  2. I was also clueless about this tax loophole. It makes absolutely no sense to tax you on this amount as income. In fact, the entire amount applied to the insurance should be removed before being taxed and not repaid.

    Thank you so much for educating me.

  3. Here since same sex couple marriage has been recognised legally I believe gay couples have the same rights/tax breaks as heterosexual couples...

    Wishing all of you a happy New Year and that 2011 brings you some happy memory moments :)!