The Treasury Department's proposal to tax employe health insurance and other fringe benefits would deprive many workers of adequate health care and could seriously damage a "life-support network" for millions, AFL-CIO President Lane Kirkland told a House committee yesterday.
"The attempt to raise revenues by taxing workers' benefits and reducing their standard of living is patently unfair," Kirkland said. ". . . The employe benefit programs under attack are not frivolous perks or gimmicks to shelter income. They don't generate phony losses or otherwise reduce the taxes of the privileged, but are widely distributed in the national interest."
The Treasury plan, facing increasing opposition from labor, employers and insurers, would tax employes for any health insurance premiums paid by the employer above $75 a month for individuals and $175 a month for families.
The Treasury's deficit-reduction package also would tax employer-paid group life insurance. Currently, the first $50,000 of coverage is tax-exempt. The plan also would tax all unemployment insurance and worker compensation payments and would end tax exemptions for employer-paid day care, group legal services and tuition reimbursements.
Department officials said the tax changes would net $24 billion for the Treasury. They said the health provision would affect about 30 percent of the work force. The insurance industry estimates that 60 percent of workers might be taxed to some degree. Pension contributions are not to be taxed, but Kirkland warned that the current plan opens the door for that.
Rep. Augustus F. Hawkins (D-Calif.) chairman of the House Education and Labor Committee, said he had convened the hearing because the "desperation" of Reagan administration "tax theorists" threatens employer health plans.
Various Democratic committee members criticized the plan, while several Republicans suggested the tax revision would be fair because workers covered by health plans enjoy an advantage over those without coverage. Kirkland responded that the best solution would be broadening coverage rather than penalizing those have earned it, often through collective bargaining.
The AFL-CIO, the American Council of Life Insurance and other business groups have launched lobbying efforts aimed largely at the House Ways and Means Committee. Many employers are concerned that the tax would fuel demands for wage increases and improved benefits. Sen. Bob Packwood (R-Ore.), chairman of the Senate Finance Committee, is leading opposition to the plan in the Senate.
Kirkland said if taxes were imposed on health insurance, many young, poor and single workers might decide to drop coverage, which would result in higher premiums for those remaining. The tax change would "undermine" private health plans, he said, burdening the public health system further.
"It would be hard to overstate the role of this life-support network in developing the nation's economy," Kirkland said. He said that providing job-related health insurance to some 140 million Americans had given workers "the sense of security and confidence" that enables them to spend on home mortgages, college tuition, automobile loans and other major expenses that they might forgo if they worried about health coverage.
Rep. Matthew G. Martinez (D-Calif.), who said he had been both an employer for 21 years and a union member, said that "there is something very basically wrong with taxing health benefits" because good health plans benefit not only workers but also employers because they are a major inducement to maintaining employe morale and a stable work force.