ESTIMATING THE REVENUE EFFECTS OF THE 

ADMINISTRATION’S FISCAL YEAR 2008 PROPOSAL 

PROVIDING A STANDARD DEDUCTION FOR HEALTH INSURANCE: 

MODELING AND ASSUMPTIONS 

 

Prepared by the Staff 

of the 

JOINT COMMITTEE ON TAXATION 

 

March 20, 2007 

JCX-17-07 
i 

CONTENTS 

Page

INTRODUCTION .......................................................................................................................... 1 

A. Description of Assumptions Relating to the Administration Proposal........................... 2 

B. Administration and Compliance Issues .......................................................................... 7 

C. Issues Relating to the Earned Income Tax Credit......................................................... 10 

D. Baseline Assumptions for Employer-Provided Health Coverage................................. 11 

E. Effects on Employer Health Plans and Insurance Coverage ........................................ 12 

F. Effects on Employer-Provided Health Coverage Premiums and Employee 

Compensation ............................................................................................................... 14 

G. Application of Individual Income Micro-Simulation Tax Model................................. 17 

H. Revenue Estimate.......................................................................................................... 18
1 

INTRODUCTION 

The Administration’s Fiscal Year 2008 Budget includes a proposal to create a new 

standard deduction for health insurance, while generally repealing the present-law tax subsidies 

relating to health coverage. The Administration provided a brief description of this proposal in 

the General Explanations of the Administration’s Fiscal Year Revenue Provisions (Feb. 2007) 

prepared by the Treasury Department (the “Blue Book”).1 While a number of the details of the 

proposal remain unclear, this document,2

 prepared by the staff of the Joint Committee on 

Taxation (“Joint Committee staff”), describes the economic modeling that the Joint Committee 

staff has undertaken to assess the revenue effects of this proposal. 

Any revenue estimate is measured as the difference between the Federal receipts 

expected to result after enactment of the proposal and the Congressional Budget Office’s 

projections of baseline Federal receipts. In preparing any revenue estimate, the Joint Committee 

staff identifies key economic decisions that must be made by taxpayers, assesses the likely 

behavioral responses they will make and the effect of these responses on the growth of important 

baseline economic variables, and considers important administrative design features of the 

proposal. This document describes this estimating process with respect to the Administration’s 

health care proposal. As described in more detail below, among the important economic 

variables with respect to this proposal are the number of taxpayers presently in employer group 

health care plans and the projected rate of growth of health care costs. Among the important 

economic decisions are the decision by employers to offer group health care as an employee 

benefit and the decision of taxpayers to purchase health insurance outside of an employer group 

context. This document also discusses administrative issues expected to arise under the proposal 

and the assumptions made by the Joint Committee staff where the Administration’s description 

of the proposal provided insufficient details. The document also describes how the staff’s 

individual tax model is used to estimate the aggregate effects of the proposal. The Joint 

Committee staff assesses the effects of these decisions on Federal receipts under the proposal as 

compared to Federal receipts under present law in order to arrive at the revenue estimate. 

The Joint Committee staff welcomes comment on its modeling from other analysts in the 

field.

 1

 The description of this proposal is on pages 18-20 of the Blue Book. 

2

 This document may be cited as follows: Joint Committee on Taxation, Estimating the Revenue 

Effects of the Administration’s Fiscal Year 2008 Proposal Providing a Standard Deduction for Health 

Insurance: Modeling and Assumptions, (JCX-17-07), March 20, 2007. This document is also available 

on the web at www.house.gov/jct. 
2 

A. Description of Assumptions Relating to the Administration Proposal 

Repeal of existing tax subsidies

The Administration’s health proposal would repeal the income and FICA tax exclusions 

for employer-provided health coverage, including coverage that is provided under health 

reimbursement arrangements (“HRAs”) and health flexible spending accounts (“FSAs”). 

Employers would be required to include the value of employer-provided health coverage in 

wages on each employee’s W-2 and the value of the coverage would be subject to income and 

FICA tax withholding. The Joint Committee staff has assumed that the value of employerprovided health coverage generally would be determined as under the COBRA continuing health 

care rules. That is, each employer would divide total health plan costs by the number of 

employees in the health plan to obtain an average cost per employee (with separate calculations 

for single and family coverage), and this average cost would be included in the taxable income of 

each employee. 

The Joint Committee staff assumes that the repeal of the income and FICA tax exclusions 

for employer-provided health coverage would also apply to any health coverage that employers 

provide to retirees, and that the valuation method for such coverage would be the same as for 

active employees. That is, each employer would divide total retiree health plan costs by the 

number of retirees in the health plan to obtain an average cost per retiree (with separate 

calculations for single and family coverage), and this average cost would be treated as wages 

received by the retiree and would be subject to income and FICA taxes. 

The proposal would retain the present-law income and FICA tax exclusions for employer 

contributions to health savings accounts (“HSAs”). 

The proposal would repeal the deduction for the health insurance expenses of selfemployed individuals (sec. 162(l)). 

Present law provides an itemized deduction for medical expenses (including qualifying 

long-term care expenses) in excess of 7.5 percent of adjusted gross income.3

 The 

Administration’s proposal would repeal the itemized deduction for medical expenses (including 

qualifying long-term care expenses) with respect to individuals not enrolled in Medicare. The 

deduction would be retained for Medicare enrollees. 

Under present law, qualifying long-term care insurance premiums and expenses fall 

within the definition of health insurance and, with certain exceptions, receive the same tax 

treatment as health insurance expenses. In particular, present law provides an income and FICA 

tax exclusion for employer-provided long-term care insurance, self-employed individuals may 

claim an above-the-line deduction for long-term care insurance premiums, and qualified longterm care services and premiums are treated as medical expenses for the purpose of the itemized 

deduction for medical expenses. The Joint Committee staff assumes that the Administration’s 

proposal would repeal these exclusions and deductions, except that the itemized deduction would 

be retained for individuals enrolled in Medicare. 

 3

 For alternative minimum tax purposes, the 7.5-percent threshold is increased to 10 percent. 
3 

After the repeal of the income and FICA tax exclusions, employer contributions toward 

the cost of health coverage would be taxable to the enrollee, and for income tax purposes the 

enrollee would be viewed as having paid the employer share of the premium. For employersponsored health insurance enrollees who are also enrolled in Medicare, the employer share of 

the premium would qualify as an itemized medical expense. This would provide income tax 

savings for Medicare enrollees who itemize deductions (in lieu of the standard deduction) and 

have itemized medical expenses (including newly-taxable employer premium contributions) that 

exceed 7.5 percent of adjusted gross income. 

New deduction for health insurance

Beginning in 2009, the Administration’s proposal would provide a new deduction for 

health insurance for individuals who are covered by qualified health insurance. The health 

deduction would apply for both income and employment tax purposes. The Joint Committee 

staff understands that the deduction would only apply to the earned incomes of the taxpayers 

who qualify for the deduction. For this purpose, the Joint Committee staff has assumed that 

earned income means wages as reported on the W-2 for FICA tax purposes plus any net earnings 

from self employment. The Joint Committee staff assumes that taxpayers who have only 

unearned income would not benefit from the deduction, and those who earn less than the 

deduction would not receive the full benefit of the deduction. The maximum annual deduction 

(in 2009) would be $7,500 for individuals with single coverage for the entire year and $15,000 

for individuals with family coverage for the entire year. The deduction would be determined on 

a monthly basis and would be based on insurance coverage as of the first day of each month. 

That is, one-twelfth of the annual maximum deduction would apply for each month of qualifying 

coverage. In years after 2009, the maximum annual deduction would be indexed to changes in 

the Consumer Price Index. The health deduction would apply for purposes of the regular income 

tax and the alternative minimum tax. 

The maximum amount of the deduction (in 2009) would be limited to $15,000 per tax 

return. Thus, for example, if a husband and wife have two children and file a joint return, and 

each spouse has qualifying health coverage that covers that spouse and one child, the maximum 

deduction for the joint return would be $15,000. In this situation, each spouse would be allowed 

a health deduction, but the sum of the deductions would not be permitted to exceed $15,000. 

The Joint Committee staff assumes that eligibility for the deduction would be limited to 

individuals who are policyholders with qualifying health insurance, and that individuals who 

have health insurance coverage as a spouse or dependent would not qualify for the deduction. 

Thus, in the case of a married couple with one policy that provides family coverage, the 

deduction would apply to the earned income of the spouse who is the policyholder. The 

inclusion of the other spouse on the policy would qualify the policyholder for the $15,000 family 

coverage deduction. 

Individuals who are enrolled in Medicare, Medicaid, or SCHIP would not qualify for the 

deduction and would not qualify as covered dependents for purposes of the family coverage 

deduction. Individuals who claim the health coverage tax credit (“HCTC”) or pay for health 

insurance from an HSA or MSA would not qualify for the deduction. 
4 

The Blue Book does not specifically discuss the treatment of active duty and retired 

military personnel with Tricare health coverage. The Joint Committee staff assumes that the 

repeal of the income and FICA tax exclusions for employer-provided health benefits would not 

apply to Tricare health coverage and that individuals with Tricare coverage would not qualify for 

the proposed health deduction. 

The Joint Committee staff assumes that employers who provide qualifying health 

insurance to their employees would reduce FICA tax withholding from each employee’s wages 

in accordance with the health deduction. Employees could elect to reduce income tax 

withholding. The deduction would also serve to reduce the FICA taxes imposed on employers. 

The Joint Committee staff assumes that employers would be required to report insurance 

coverage information to employees and the IRS. 

The Joint Committee staff assumes that individuals who purchase qualifying non-group 

coverage would receive similar information from their insurers and that this information would 

be provided to the IRS. In addition, the staff assumes that this information would be provided to 

employers to verify coverage for the purpose of adjustments in income and FICA tax 

withholding. 

Minimum coverage requirements for qualifying insurance

Eligibility for the proposed health deduction would be limited to individuals with health 

coverage that satisfies certain minimum coverage requirements, including: (1) a limit on out-ofpocket exposure for covered expenses that is not higher than that currently allowable for HSAeligible high-deductible health plans (e.g., for 2007, $5,500 for single coverage and $11,000 for 

family coverage); (2) a reasonable annual and/or lifetime benefit maximum; (3) coverage for 

inpatient and outpatient care, emergency benefits, and physician care; and (4) guaranteed 

renewability by the provider. The minimum level of coverage is not intended to preempt State 

laws mandating certain coverage. Thus, eligible coverage is subject to applicable State 

minimum coverage rules. Under regulations to be promulgated by the Department of the 

Treasury, the health deduction would be denied for policies that do not meaningfully limit 

individual economic exposure to extraordinary medical expenses. 

In the absence of draft legislative language that provides greater specification of the 

minimum coverage requirements, it is difficult to determine the effect of the requirements on the 

premiums that would be paid for insurance that satisfies only the minimum requirements. The 

Joint Committee staff assumes that some individuals who are presently uninsured will be 

comparing the tax savings from the deduction with the premium they would pay for the least 

expensive qualifying health insurance, i.e., insurance that provides little or no benefits beyond 

the minimum requirements. The Joint Committee staff assumes that tighter requirements would 

result in higher premiums for coverage that satisfies only the minimum requirements, and these 

higher premiums would lead to smaller gains in health insurance coverage. Less strict 

requirements would result in lower premiums for coverage that satisfies only the minimum 

requirements, and this would lead to larger gains in insurance coverage. 

If an uninsured individual has sufficient earned income, the health deduction will provide 

substantial income and FICA tax savings. For an individual in the 15-percent Federal income tax 
5 

bracket who is under the OASDI wage limit, the $7,500 deduction would provide $1,125 in 

Federal income tax savings and about $574 in employee FICA tax savings (and perhaps some 

State income tax savings).4 It is expected that an individual in this situation would be interested 

in comparing the total tax savings of $1,699 with the premium for a health plan that provides the 

minimum in benefits. If the individual is young and healthy (or lives in a State with relatively 

low average premiums), the premium could be less than the tax savings from the health 

deduction. Thus, under the Administration’s health plan, some individuals who are presently 

uninsured might receive a net gain from the purchase of health insurance. Some individuals who 

place little or no value on health insurance might purchase the insurance just to obtain this net 

gain. 

It may be difficult to specify minimum coverage requirements that would disqualify any 

health plan that offers limited benefits with a correspondingly low premium. Assume, for 

example, that the minimum coverage requirements for single coverage are a $1,500 annual 

deductible, a 30-percent copayment, and a $5,500 annual limit on out-of-pocket expenses. As a 

general rule, these plan deductibles, copayments, and out-of-pocket maximums would apply only 

to provider billings that fall within the allowable charges under the health plan. The health plan 

would have a schedule of allowable charges for each type of service. For example, a fee-forservice health plan might list $100 as the allowable charge for a physician office visit. If the 

enrollee visited a physician who charged $120, only $100 would be counted toward the plan 

deductible. If the enrollee had already exceeded the deductible for the year, the health plan (in 

this example) would pay 70 percent of $100, and the enrollee would be responsible for the 

remaining 30 percent plus the additional $20 not covered under the plan. Furthermore, the 

additional $20 would not count toward the annual limit on out-of-pocket expenses. Thus, the 

schedule of allowable charges is an important determinant of plan benefits. If the minimum 

coverage requirements provide no minimums for the allowable charges for various services, an 

insurer could offer a health plan with an allowable charge of only $30 for a physician office visit. 

Schedules with very low allowable charges could be used to create inexpensive policies that 

offer severely limited benefits. 

Even if the minimum coverage requirements were to contain lists of minimums for 

allowable charges, there would still be an opportunity for insurers to create inexpensive policies 

with limited benefits. Insurers could offer preferred-provider organization (“PPO”) or exclusiveprovider organization (“EPO”) health plans that would only comply with the minimums for 

allowable charges for physicians and hospitals within their networks. Health plan benefits could 

be severely limited (in the case of a PPO) or non-existent (in the case of an EPO) for enrollees 

who use physicians and hospitals outside the plan networks. Insurers could create inexpensive 

policies by limiting the numbers of physicians and hospitals within their networks. 

 4

 It is assumed here that the individual is employed and pays half of the FICA taxes associated 

with his wages. The health deduction would also reduce the FICA tax liability of the individual’s 

employer. An employee in a large firm would likely have little ability to renegotiate his individual 

compensation package to account for the reduction in the employer’s FICA tax liability. Thus, in the 

short run, the Joint Committee staff expects that the reduction in employer FICA tax liability would not 

be a factor that the individual would consider in deciding whether to buy insurance. 
6 

For the purpose of preparing a revenue estimate for the Administration’s health proposal, 

the Joint Committee staff has assumed that the proposal will contain legislative language that 

specifies in detail the minimum coverage requirements for insurance that qualifies for the health 

deduction. The Joint Committee staff has also assumed that the Department of the Treasury will 

issue detailed regulations concerning the minimum coverage requirements and that the IRS will 

be able to enforce compliance with these regulations. 

If the legislative language for the health proposal and the associated regulations provide 

only limited specification of the minimum coverage requirements, the revenue estimate for the 

proposal would need to be revised. In such a case, it is expected that some insurers would take 

advantage of the lack of specific requirements by creating low-premium health insurance policies 

with very limited benefits and marketing these policies to individuals who are presently 

uninsured. Some of the uninsured would purchase these policies because the tax savings from 

the health deduction would exceed the policy premium. If the minimum coverage requirements 

provided insurers with an opportunity to market policies with premiums that are 20 percent lower 

than the average premiums now being charged for limited-coverage policies, the revenue loss 

from the health deduction might increase by as much as $60 billion over the fiscal years 2009 

through 2017. (In other words, the revenue loss might be as much as $60 billion higher than the 

revenue estimate in Table 1.) The additional revenue loss would be associated with an increase 

in insurance coverage of 3 million individuals beyond what is assumed in the current estimate. 
7 

B. Administration and Compliance Issues 

Under present law, employers are required to withhold FICA taxes from all wages and, in 

general, the amount of FICA taxes withheld is equal to the amount owed. One exception is the 

case in which an employee works for two or more employers (either concurrently or 

consecutively) and has total wages that exceed the OASDI wage limit. In this case, FICA taxes 

are overwithheld and the taxpayer must file a tax return to claim a refund of the overpaid taxes. 

There are few situations in which FICA taxes are underwithheld by employers who are in 

compliance with the FICA withholding law and regulations. 

The Administration has not provided any details on the manner in which the proposed 

health deduction will be administered for FICA tax purposes, but it appears that the deduction 

would pose some administrative problems. The health deduction may lead to many situations in 

which FICA taxes are underwithheld. In general, it is more difficult for the IRS to collect 

underwithheld taxes than to verify claims for refunds of overwithheld taxes. 

Consider the situation in which a husband and wife are employed and each has employerprovided insurance. If one spouse has single coverage and the other has family coverage, or both 

have family coverage, the sum of their health deductions will exceed the $15,000 limit per tax 

return. Thus, total FICA taxes for the couple will be underwithheld. The employee portion of 

the underwithheld taxes could be computed on the taxpayer’s tax return and paid when the return 

is filed, but collecting the employer portion of the underwithheld FICA taxes would present 

additional difficulties. Any method for collecting the unpaid employer FICA taxes is likely to be 

cumbersome and, to some degree, ineffective. Thus, it is possible that some employer FICA 

taxes would go uncollected. 

In the example of a husband and wife who each have employer insurance, there is also 

the problem of determining the allocation of the maximum $15,000 deduction between the 

spouses. Suppose that the husband has a single coverage policy through his employer and the 

wife has a family coverage policy through her employer. The husband’s employer would apply 

the $7,500 deduction for employment tax purposes and the wife’s employer would apply the 

$15,000 deduction for employment tax purposes. However, at some point, perhaps at the time of 

income tax filing, one or both of these deductions would need to be reduced to satisfy the 

$15,000 maximum. The proposal does not specify how the maximum deduction would be 

allocated between the spouses for payroll tax purposes. In some cases, the allocation could 

affect the total FICA tax liability of the couple. Assume, for example, that one spouse is under 

the OASDI wage limit and the other spouse is over the limit. Total FICA taxes for the couple 

could be reduced by allocating as much of the maximum deduction as possible to the spouse 

under the limit. Regardless of how the allocation is made, there would need to be coordination 

with the employers because the allocation would determine the extent to which each of the two 

employers owes additional FICA taxes. The need to allocate the FICA tax deduction between 

spouses with differing employers will tend to exacerbate the problem of collecting underwithheld 

employer FICA taxes. 

Another example of incorrect FICA tax withholding would be the situation in which a 

taxpayer claims the health deduction for non-group insurance and works at two part-time jobs 

(either consecutively or concurrently) that each pay less than the health deduction. If the 
8 

taxpayer provides appropriate proof of insurance coverage to only one of the two employers, 

FICA taxes will be overwithheld. If he provides proof of coverage to both employers, FICA 

taxes will be underwithheld. Again, in the case of the underwithheld FICA taxes, it is not clear 

how the IRS would collect the unpaid employer FICA taxes, and it is not clear which employer 

would be liable for the unpaid FICA taxes. 

Another administrative issue is the problem of individuals who are covered by more than 

one insurance policy. Consider, for example, the case of divorced parents who each have a 

family policy that covers their child. Under the proposal, it is unclear whether only one parent 

can claim the $15,000 deduction (and if so, which parent), or whether both can claim the $15,000 

deduction. In this situation, one approach would be to give the family coverage health deduction 

to the parent who claims a personal exemption for the child. However, this could result in the 

loss of otherwise legitimate claims for the health deduction, because the proposal requires that 

the deduction be determined on a monthly basis.5 

Another administrative issue relates to taxpayers who are underwithheld with respect to 

FICA taxes but have gross incomes that are below the filing threshold. The health deduction 

applies to income as well as FICA taxes, so the deduction could increase the number of 

taxpayers who have income but are not required to file returns. Filing requirements might need 

to be expanded so that insurance coverage for the health deduction can be verified by the IRS 

and a reconciliation can be made of FICA taxes withheld and FICA taxes owed. 

The proposed health deduction may create an additional incentive for fraud. The use of 

false dependents has been an issue with respect to other tax benefits such as the earned income 

tax credit.6

 The health deduction may create a similar incentive because family coverage would 

provide a deduction that is twice as large as the deduction for single coverage, and in some cases 

the tax savings from the larger deduction might more than offset the additional premium cost to 

the enrollee. The potential for fraud may vary depending upon the minimum coverage 

requirements (which would affect premiums for policies that satisfy only the minimum 

requirements) and the enforcement mechanisms that are developed under the proposal. 

For the purpose of preparing a revenue estimate for the Administration’s health proposal, 

the Joint Committee staff assumes the following: 

 5

 Consider, for example, the situation in which a child is covered under his father’s health plan 

for the entire year. Assume the child lives with his father for the first five months of the year but lives 

with his mother for the remainder of the year and obtains additional primary (or secondary) coverage 

under her health plan. Under the Administration’s health proposal, the husband would be entitled to the 

family health deduction for (at a minimum) the first five months of the year. The father would lose the 

family health deduction if eligibility for the deduction requires the claiming of a personal exemption for 

the child. 

6

 The EITC provides an example of a tax benefit that is larger for individuals with qualifying 

dependents. It appears that some taxpayers are claiming fictitious or non-qualifying dependents in order 

to obtain a larger EITC. In a 1999 EITC compliance study, the IRS estimated that over one million EITC 

tax returns claimed children that were not the qualifying children of the taxpayers. 
9 

1. In the case in which a husband and wife both qualify for health deductions and the 

sum of the deductions exceeds the $15,000 limit, the deductions would be reduced 

proportionately to satisfy the $15,000 limit. 

2. In the case in which individuals are covered by more than one insurance policy (e.g., a 

child covered by the policies of each divorced parent), all coverage would be counted 

for the purpose of determining eligibility for the family deduction, regardless of 

whether individuals are covered on other policies. 

3. A small percentage of the taxpayers who are presently insured would claim health 

deductions that are greater than the deductions to which they would be entitled given 

their current coverage. For example, it is assumed that some individuals who now 

have single coverage would switch to a family policy that covers individuals who are 

already insured.7

 This assumption increases the estimated revenue loss from the 

health deduction by a total of $11 billion over the fiscal years 2009 through 2017. 

4. All taxpayers claiming the deduction would be required to file income tax returns and 

all taxpayers would comply with this filing requirement. This would give the IRS an 

opportunity to verify the insurance coverage and the FICA tax liability of taxpayers 

claiming the health deduction.8

5. The legislative language for the proposal will provide an effective administrative 

procedure for collecting underwithheld FICA taxes from employers.9 If the legislative 

language provides no means of collecting underwithheld employer FICA taxes, our 

revenue estimate for the proposal will need to be revised. The Joint Committee staff 

estimates that, under the proposal, the underwithholding of employer FICA taxes will 

total about $50 billion over the fiscal years 2009 through 2017. 

 7

 The family policy could cover (1) someone who is already covered by another policy, in which 

case their would be duplicate (primary and secondary) coverage, or (2) someone who had been covered as 

a dependent on another policy and drops off that policy. An example of the latter would be the situation 

in which a divorced father had a family policy covering himself and two children, and the mother had 

single coverage. One child could switch from the father’s policy to the mother’s policy so that both could 

qualify for the family coverage health deduction. 

8

 The Joint Committee staff assumes that either (a) the regulations would allow such coverage to 

count for purposes of the deduction, or (b) the regulations would not allow such coverage to count but the 

IRS would not have the resources to uncover and disallow deductions in cases in which individuals have 

multiple coverage. 

9

 Under present law, taxpayers may claim a refund for overpayment of the employee share of 

FICA taxes on earnings, but there is no administrative procedure for refunding to employers the overpaid 

employer share of FICA taxes. An overpayment of FICA taxes occurs when an individual works two 

jobs and earns total wages that exceed the OASDI wage limit. In tax year 2003, taxpayers claimed 

refunds of $1.6 billion in overpaid employee FICA taxes. The employer share of the overpaid FICA taxes 

would also be about $1.6 billion. 
10 

C. Issues Relating to the Earned Income Tax Credit 

The Joint Committee staff assumes that both the repeal of the income tax exclusion for 

employer-provided health coverage and the proposed health deduction would be reflected in the 

measure of earned income that is used to compute the earned income tax credit (“EITC”).10 

Assume, for example, that an employee has single coverage through an employer health plan, 

and assume that the coverage is qualifying coverage for purposes of the $7,500 health deduction. 

If the employer-provided coverage is valued at $4,000 per year, the employee’s earned income 

for purposes of the EITC would be reduced by $3,500. If the employer-provided coverage is 

valued at $8,000, the employee’s earned income for purposes of the EITC would be increased by 

$500. 

Under the Administration’s health proposal, the phaseout rate for the EITC for taxpayers 

with qualifying children would be reduced to 15 percent. This would help some taxpayers who 

might otherwise lose the EITC as a result of the income effects of the repeal of the exclusion for 

employer health benefits and the health deduction. It would also help all EITC recipients in the 

phaseout range of the credit. 

 10 The proposal is not clear as to whether the SDHI applies in measuring earned income for 

purposes of the earned income tax credit. 
11 

D. Baseline Assumptions for Employer-Provided Health Coverage 

Our baseline estimates of employer-provided health coverage and premiums are based on 

data from the 2004 Medical Expenditure Panel Survey (Insurance Component), and data from 

Office of Personnel Management with regard to the Federal Employees Health Benefits Program. 

According to these two sources, there were 89.1 million policyholders with employer-provided 

health coverage in 2004. Total premiums were $641 billion, of which $464 billion were paid by 

employers, $120 billion were paid by active employees on a tax-preferred basis, and $57 billion 

were paid by active employees, COBRA enrollees, and retirees on an after-tax basis. These 

figures include premiums for basic insurance and optional insurance (primarily dental and vision 

insurance), and employee contributions to health flexible spending arrangements (“FSAs”). 

The Joint Committee staff baseline assumption is that there will be 94.1 million 

policyholders with employer-provided insurance in 2017. This is based on the assumption that 

the number of policyholders will grow by a total of 5.5 percent from 2004 to 2017. The Census 

Bureau estimates that the total United States resident population will grow by 11.9 percent over 

the same period. However, the population of individuals between the ages of 18 and 55 is 

expected to grow by only 5.5 percent, and it seems reasonable to assume that the number of 

policyholders with employer insurance will grow at about the same rate. 

The Joint Committee staff baseline assumes that premiums for employer-provided 

coverage increased by about 13 percent from 2004 to 2006 and will increase by an average of 7 

percent per year from 2006 to 2017. The Joint Committee staff estimates that in 2017 under 

present law, total premiums for employer-provided coverage will be $1,638 billion, with $1,145 

billion paid by employers, $338 billion paid by active employees on a tax-preferred basis, and 

$155 billion paid by active employees, COBRA enrollees, and retirees on an after-tax basis. 

Under the proposal, the maximum single and family coverage health deductions would be 

indexed to changes in the Consumer Price Index (“CPI”). The Congressional Budget Office 

baseline for the CPI has been used to forecast changes in the health deductions. Under the CBO 

baseline, the CPI increases at an average annual rate 2.2 percent from 2009 to 2017. The Joint 

Committee staff estimates that the single coverage deduction would increase from $7,500 in 

2009 to $8,930 in 2017, and the family coverage deduction would increase from $15,000 in 2009 

to $17,850 in 2017. 
12 

E. Effects on Employer Health Plans and Insurance Coverage 

Under present law, large employers have a strong incentive to provide health insurance to 

employees. The income and FICA tax exclusions for employer-paid insurance reduce the aftertax cost of the insurance far below what employees would pay for non-group insurance that 

provides comparable benefits, and large employers also have the advantage of lower 

administrative costs. In large firms (over 1,000 employees), administrative costs for health plans 

are equal to about 10 percent of benefits. Thus, a health plan that provided average benefits of 

$5,000 per employee would have administrative costs of about $500 per employee, and the total 

premium would be about $5,500. In contrast, a non-group policy would have administrative 

costs equal to about 50 percent of benefits, and a policy providing benefits of $5,000 per 

employee would have a total premium of about $7,500. 

The Administration’s health proposal would, in general, equalize the tax treatment of 

employer-provided insurance and non-group insurance.11 However, employers would retain the 

advantage of lower administrative costs for insurance. This advantage would be greatest for 

large employers and minimal for very small employers. The Joint Committee staff assumes that 

administrative costs would equal about 10 percent of benefits in firms with 1,000 or more 

employees, about 13 percent in firms with 500 to 999 employees, about 16 percent in firms with 

100 to 499 employees, about 20 percent in firms with 25 to 99 employees, about 25 percent in 

firms with 10 to 24 employees, and about 48 percent in firms with fewer than 10 employees. 

The Joint Committee staff assumes that employers would maintain their health plans after 

enactment of the Administration’s health proposal if (and only if) the administrative cost savings 

provide a sufficient advantage over non-group insurance. To measure this advantage, it is useful 

to consider the situation of a young and healthy employee who might consider dropping the 

employer coverage to obtain less expensive non-group coverage. If young and healthy workers 

drop employer coverage to obtain cheaper non-group coverage, average premiums are increased 

for the workers who remain in the employer plan. The higher premiums will persuade other 

relatively young and healthy workers to drop employer coverage, and average premiums are 

increased further for those who remain in the employer plan. This cycle could continue to the 

point where the employer drops the health plan due to insufficient enrollment. 

For example, assume that a young and healthy worker has single coverage in a large 

employer health plan. The total premium is $5,500, and the worker’s share of the premium is 20 

percent or $1,100. The employer would pay the remaining $4,400. The administrative costs 

would be about 10 percent of benefits (in a firm with 1,000 or more employees), so the policy 

would provide enrollees with an average benefit of about $5,000. But this young and healthy 

worker would be expected to use far less than the average in medical services. The expected 

benefit for this worker might be only $2,500. If this worker switched to a non-group plan 

providing comparable benefits, the premium would be $2,500 plus administrative costs of $1,250, 

 11 Under the Administration’s health proposal, employer contributions to HSAs would remain 

excludable for purposes of income and FICA taxation. Individuals who make direct contributions to 

HSAs receive a deduction for income tax purposes only. Thus, employer coverage would retain a tax 

advantage over non-group coverage to the extent that employers provide high-deductible HSA-eligible 

coverage and contribute to the HSAs of employees. 
13 

for a total premium of about $3,750. If the worker chose to remain in the employer plan, the 

total cost to the worker would be the $1,100 employee premium plus the income and FICA taxes 

that the worker would owe on the $4,400 employer contribution. If the worker is in the 15-

percent bracket for Federal income tax purposes, and the 5-percent bracket for State income tax 

purposes, and is under the OASDI wage limit, the taxes on the $4,400 employer contribution 

would be about $1,217. Thus, under the Administration’s health proposal, the total cost of the 

employer insurance for this worker would be $1,100 plus $1,217, or $2,317. This is $1,433 less 

than the cost of the comparable non-group plan. Thus, it would appear that the typical young 

worker in a large employer health plan would be better off staying in the plan. 

The comparison would be quite different for a young and healthy worker in a firm of 

fewer than 10 employees. The administrative costs for a very small employer health plan could 

be almost as large as the administrative costs for a non-group plan, and under the 

Administration’s proposal, it would be difficult for very small employers to maintain their health 

plans. The Joint Committee staff assumes that, under the Administration’s health plan, many 

small employers would drop their health plans and the total number of individuals covered by 

employer insurance would be less than under present law. 

The Joint Committee staff estimates that in calendar year 2017, the Administration’s 

health proposal will reduce the number of individuals covered by employer-provided insurance 

by about 6 million. Fewer than 500,000 of the individuals losing employer-provided health 

insurance would become uninsured. The remainder would purchase non-group insurance. 

The Joint Committee staff estimates that in calendar year 2009, well over 9 million tax 

returns would claim the health deduction for newly-purchased insurance (i.e., insurance that 

would not have been purchased in the absence of the deduction). This newly-purchased 

insurance would cover over 12 million individuals for all or part of the year. On any given day 

in 2009, about 8.5 million fewer people would be uninsured as a result of the health deduction. 

The Joint Committee staff estimates that in calendar year 2017, over 8 million tax returns 

would claim the health deduction for newly-purchased insurance. This newly-purchased 

insurance would cover over 11 million individuals for all or part of the year. On any given day 

in 2017, about 8 million fewer people would be uninsured as a result of the health deduction. 
14 

F. Effects on Employer-Provided Health Coverage Premiums 

and Employee Compensation 

Present law provides a tax subsidy for employer-paid health insurance that is generally 

proportional to the size of the health insurance premium. If an employee with $5,000 of 

employer-paid health insurance receives $1,000 in tax savings from the income and FICA tax 

exclusions, the same employee with $10,000 of employer-paid health insurance would receive 

$2,000 in tax savings. The income and FICA tax exclusions provide a subsidy for each 

additional dollar of health insurance, and average premiums for employer-sponsored health 

insurance are likely to be higher than they would be in the absence of this tax subsidy. 

The Administration’s health proposal would replace the income and FICA tax exclusions 

with a deduction of $7,500 or $15,000 for the purchase of any health insurance that satisfies the 

minimum coverage requirements. A taxpayer with a $4,000 family coverage policy that satisfies 

the minimum requirements would receive the same deduction as a taxpayer with a $12,000 

family coverage policy that provides benefits far above the minimum requirements. The 

proposal provides no additional tax subsidy for insurance that exceeds the minimum coverage 

requirements. Thus, the Joint Committee staff assumes that the proposal would lead to a decline 

in average premiums for employer-paid health insurance. It is expected that employees would 

ask for (or agree to) reductions in health insurance coverage (i.e., leaner coverage with reduced 

benefits) in exchange for higher cash wages or increases in other forms of compensation.12 

One might think that a decline in average premiums for employer-paid health insurance 

would reduce the revenue gain from the repeal of the income and FICA tax exclusions. 

However, any changes in premiums that are assumed to occur as a result of the proposal are 

generally immaterial to the revenue estimate of the proposal. An estimate of the revenue effects 

of a proposal is a comparison of what revenues are expected to be under the proposal compared 

to what revenues would have been under present law. It is the cost of premiums under present 

law, with the existing exclusion, that determines how much income would be taxable under the 

proposal that is not taxable under present law. 

If premiums decline under the Administration’s health proposals, this would reduce the 

income and FICA taxes that employees would pay on their health benefits, but it is highly 

unlikely that employees would agree to a reduction in health benefits with no offsetting increase 

in cash wages or other benefits.13 If a reduction in employer-paid health insurance is offset by an 

increase in cash wages, the reduction in employer-paid health insurance will have no revenue 

 12 Reductions in health insurance coverage will increase the employee share of the cost of health 

care services and products, and this should lead to a decline in the demand for health care services and 

products. In the longer run, the prices of health care services and products would either decline or 

increase more slowly than under the present-law baseline. 

13 Economists generally assume that each employee receives a compensation package that equals 

the value of his contribution to the revenues of the firm. If the employee is making the same contribution 

to the firm before and after the enactment of the Administration’s health proposal, the employee should 

be receiving the same total compensation. Any reductions in employer-provided health coverage should 

be offset by increases in other forms of compensation so that total compensation remains unchanged. 
15 

effect, because cash wages and employer-paid health insurance are both taxable under the 

Administration’s health proposal. 

The Joint Committee staff assumes that any declines in average premiums for employerpaid health insurance will be offset by increases in cash wages, so that total employee 

compensation remains unchanged. Assume, for example, that an employee is now receiving 

$50,000 in cash wages and $10,000 in employer-paid health insurance. Under the 

Administration’s health proposal, the employer and employee might agree to a leaner health plan 

that costs only $8,000. In this case, it is assumed that the switch to the leaner health plan would 

be accompanied by a $2,000 increase in cash wages, so that total employee compensation is 

unchanged.14 

If total compensation is unchanged, a decline in average premiums for employer-paid 

health insurance will have little or no effect on the revenue gain from the repeal of the income 

and FICA tax exclusions. The size of the revenue gain from repeal of the exclusions is 

determined by the size of the tax-excluded premiums under present law, and is unaffected by the 

size of the taxable premiums under the Administration’s proposal. 

Expanding upon this last point, consider once again the employee with $50,000 of cash 

wages and $10,000 of employer-paid health insurance. Assume that the $10,000 policy is a 

family coverage policy that qualifies the employee for the $15,000 deduction. Under present 

law, the employee pays income and FICA taxes on $50,000 of cash wages. Under the 

Administration’s health proposal, the employee pays income and FICA taxes on cash wages and 

employer-paid health insurance and receives a $15,000 health deduction. If total compensation 

for the employee is unchanged, the cash wages and employer-paid health insurance will sum to 

$60,000, and the employee will pay income and FICA taxes on $60,000 minus the $15,000 

deduction, or $45,000. Taxable income will be $45,000 regardless of the size of the health 

insurance premium, provided that cash wages and the premium sum to $60,000. 

If the Administration’s health proposal leads to a reduction in average premiums for 

employer-paid health insurance that is not fully offset by changes in cash wages, and total 

compensation declines, there could be a decline in individual income tax revenues, but this 

would be roughly offset by an increase in business income tax revenues. Firms that spent less on 

employee compensation would have higher corporate profits and thus would pay more in taxes. 

It is possible that a decline in employer-paid health insurance would be partly offset by 

increases in employer spending on non-taxable fringe benefits such as child care, life insurance, 

tuition reimbursements, and transit and parking benefits. If this occurred, it could reduce the 

revenue gain from repeal of the income and FICA tax exclusions for employer-paid health 

 14 The analysis is somewhat more complicated than shown here because the employer’s share of 

FICA taxes is viewed as a part of the total compensation package. In this example, if the income and 

FICA tax exclusions for employer-provided health coverage were repealed, the $10,000 of employerprovided health coverage would become taxable, and the employer would owe additional FICA on the 

$10,000. In order to keep total compensation unchanged, the employer would need to reduce cash wages 

(or the health premium, or both) by an amount equal to the increase in the employer’s share of FICA 

taxes. 
16 

insurance. However, the total value of these other fringe benefits is very small in comparison 

with the value of employer-paid health insurance. In addition, it is unclear how the 

Administration’s proposal would affect the demand for these other fringe benefits. The Joint 

Committee staff assumes that the Administration’s health proposal would have a negligible 

effect on fringe benefits other than health insurance.15

In summary, the Administration’s health proposal will most likely lead to a decline in 

average premiums for employer-paid health insurance, but the extent of this decline will have 

little or no effect on the net revenue effects of the proposal. The size of the revenue gain from 

the repeal of the income and FICA tax exclusions is determined by the total amount of tax 

excluded employer-sponsored health insurance under present law, not the amount of taxable 

employer-sponsored health insurance that would be provided by employers after enactment of 

the proposal. 

 15 Under the Administration’s proposal, non-taxable benefits such as child care and life insurance 

would be the only means of receiving non-taxable compensation, and one might think that employees 

would want to receive a larger share of their compensation in the form of these non-taxable benefits. 

However, some employees now have employer-provided health coverage that is worth more than the 

$7,500 and $15,000 health deductions. These employees will be paying higher taxes under the 

Administration’s health proposal and will see a reduction in their after-tax cash wages. If these 

employees asked for increases in some non-taxable fringe benefits, the employer would need to reduce 

their cash wages to pay for these additional benefits. It is not clear that employees would be willing to 

accept a reduction in cash wages in exchange for the larger fringe benefits. In fact, some employees 

might prefer a reduction in these other fringe benefits in exchange for higher cash wages. 
17 

G. Application of Individual Income Tax Micro-Simulation Model 

Our revenue estimate for the Administration’s health proposal was prepared using the 

Joint Committee staff individual income tax model. This microsimulation model is based on a 

stratified sample of over 180,000 individual income tax returns prepared by the IRS. The sample 

is expanded (using information from the Current Population Survey) to include households who 

did not file tax returns in the sample year. The larger sample is then extrapolated to represent the 

tax returns that would be filed by taxpayers in future years. The extrapolation is consistent with 

the Congressional Budget Office (“CBO”) baseline forecast of changes in wages, dividends, 

interest, capital gains, and other income and expense items. The extrapolation is also consistent 

with the Census Bureau forecast of changes in the demographics of the U.S. resident 

population.16 

The individual income tax model contains detailed imputations for the health insurance 

coverage of each individual on the model. These imputations are supplied in part by a statistical 

matching of the tax returns and data from a recent Current Population Survey, and in part by a 

matching of the tax returns with data from a recent Medical Expenditure Panel Survey 

(Household Component). The matched survey data provide monthly information on non-group 

health insurance coverage; employer-sponsored insurance coverage (including information on 

active employee, COBRA, and retiree coverage); Medicaid, SCHIP, and Medicare coverage; and 

spells of uninsurance. Joint Committee staff provide imputations for health insurance premiums 

for each tax model individual who is identified as a policyholder with non-group insurance or 

employer-sponsored insurance. The premium information for employer-sponsored insurance is 

based on detailed premium distribution statistics from the Medical Expenditure Panel Survey 

(Insurance Component). This premium information includes (1) the total policy premium, (2) 

the employer share of the premium, (3) the employee share of the premium, and (4) an indicator 

for whether the employee premium is paid on a tax-preferred basis or an after-tax basis. 

The inclusion of this detailed information on health insurance coverage and premiums 

enables the Joint Committee staff to simulate proposals affecting the taxation of health insurance. 

The simulations incorporate the full taxable income profile of each individual on the tax model, 

and thus account for interactions between provisions affecting the taxation of health insurance 

and other special exclusions, deductions, and credits in the Internal Revenue Code. Behavioral 

responses to changes in the taxation of health insurance are incorporated into the tax model. 

 16 For a more detailed description of the individual income tax model, the reader is referred to 

Joint Committee on Taxation, Overview of Revenue Estimating Procedures and Methodologies Used by 

the Staff of the Joint Committee on Taxation, (JCX-1-05), February 2, 2005. 
18 

H. Revenue Estimate 

The Joint Committee staff assumes that all of the provisions of the Administration’s 

health proposal would be effective for taxable years beginning after December 31, 2008. For the 

purpose of preparing revenue estimates for the Administration’s health proposal, the Joint 

Committee staff has assumed that all of the Administration’s tax proposals will be enacted 

during calendar year 2007. The revenue estimate for the health proposal assumes that it will be 

enacted after all of the other tax provisions in the Administration’s budget proposal, including 

the extension of the present-law individual tax rates and the proposed modifications to the tax 

treatment of HSAs. The revenue estimate for the health proposal would change if it were 

enacted in the absence of the other Administration tax proposals. 

The estimated revenue effects of the Administration’s health proposal are shown in 

Table 1. The first line of this table shows the combined effects of repealing the income and 

FICA tax exclusions for employer-paid health insurance, the deduction for health insurance 

expenses of self-employed individuals, and the itemized deduction for the medical expenses of 

the non-elderly. Caution should be used in interpreting this revenue estimate. There are strong 

interactions among these three tax provisions and separate revenue estimates for the three 

provisions would vary greatly depending upon the order in which the provisions were enacted. 

In any given year, tax-preferred employer and employee contributions for employersponsored health insurance far exceed the insurance premiums deducted by self-employed 

individuals and the medical expenses deducted by taxpayers who itemize their deductions. In 

calendar year 2007, the Joint Committee staff estimates that (1) employer and tax-preferred 

employee contributions for health insurance will total $732 billion, (2) self-employed individuals 

will deduct $23 billion in health insurance premiums, and (3) taxpayers will claim about $120 

billion in itemized medical expenses, with about $80 billion of this total being over the floor and 

deductible against income. From these figures, one might think that the repeal of the income and 

FICA tax exclusions for employer-sponsored health insurance would account for a very large 

share of the total revenue gain shown in the first line of the revenue table. However, a standalone provision to repeal the income and FICA exclusions would raise far less revenue than what 

is shown in the first line of the revenue table. After a stand-alone repeal, the newly-taxable 

employer and employee contributions for health insurance would be deductible as an itemized 

medical expense, and many taxpayers who had not previously itemized their medical expenses 

would now find that their total medical expenses exceed the 7.5-percent-of-AGI floor. This 

increase in itemized medical expenses would offset some of the revenue gain from the repeal of 

the exclusions. 

The third line of Table 1 shows the revenue effects of the additional HSA deposits that 

would result from the expansion of high-deductible HSA-eligible insurance under the 

Administration’s health proposal. The repeal of the income and FICA tax exclusions for 

employer-paid health insurance will result in a significant increase in the marginal after-tax cost 

of employer-sponsored insurance coverage. The Joint Committee staff assumes that this would 

lead to leaner employer-sponsored health plans. Leaner plans would tend to have higher 

deductibles. Thus, an increase in the number of high-deductible HSA-eligible health plans is 

expected to occur. The Joint Committee staff estimates that under the Administration’s health 
19 

proposal, an additional 17 million policyholders will have high-deductible health plans by 

calendar year 2017. 

Table 2 shows the effects of the Administration’s health proposal on income, OASDI, 

and HI tax revenues. It also shows the outlay effects of the proposal. 

Table 3 shows the number of taxpayers who would be affected by the Administration’s 

health proposal, as classified by adjusted gross income (“AGI”) under present law, for calendar 

years 2009, 2013, and 2017. For reference, the total number of potential filing units for each 

category under present law is also provided. In 2009, more taxpayers would experience a 

decrease in tax liability than an increase in tax liability, and this is true for all income categories 

except for those with AGI above $200,000. By 2017, more taxpayers would experience an 

increase in tax liability than a decrease in tax liability, both for all taxpayers, and for taxpayers in 

all AGI categories above $40,000. The changing ratio of increased liability to decreased liability 

is primarily due to the fact that average premiums for employer-sponsored health insurance are 

assumed to increase much faster in the present-law baseline than the health deductions, which 

are indexed to changes in the Consumer Price Index. In other words, the tax increases 

attributable to the repeal of the exclusion for employer-sponsored insurance are increasing faster 

than the tax reductions attributable to the health deduction. 

In all AGI categories for all years, the average tax decrease is smaller than the average 

tax increase. In all years, only about five percent of taxpayers with AGI less than $10,000 are 

affected by the proposal, while more than 75 percent of taxpayers with AGI greater than $50,000 

are affected by the proposal. 

Caution is suggested in the use of Table 3, as it does not represent a full distribution 

analysis of this proposal. Present-law AGI is used because the proposal changes the definition of 

AGI, and thus movement of filing units between categories after the proposal would largely 

reflect definitional changes rather than behavioral responses to the policy. However, present-law 

AGI is not necessarily an ideal classification measure because (1) AGI does not include the value 

of employer-provided health insurance, non-taxable Social Security benefits, tax-exempt interest, 

excluded foreign earned income, and other sources of income that arguably enhance a taxpayer’s 

economic well-being, and (2) AGI is reduced by deductions for IRA contributions, selfemployed health insurance expenses, and other items that arguably do not reduce the individual’s 

economic well being. In addition, because the AGI categories in Table 3 have not been adjusted 

for inflation, the numbers of returns in each category are not directly comparable for the different 

years. 
20 

VE

Provision Effective 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 20

1. Repeal the income and FICA exclusions for

employer-paid health coverage, the self-employed healthdeduction, and itemized medical expenses for individualsnot enrolled in Medicare...................................................... tyba 12/31/08 --- --- 206.3 312.8 339.9 369.3 400.8 434.3 470.1 508.6 549

2. Provide a health deduction ($7,500 for single coverage

and $15,000 for family coverage) for individuals withprivate health insurance...................................................... tyba 12/31/08 --- --- -219.6 -323.2 -336.5 -350.1 -363.8 -377.6 -391.3 -405.5 -420

3. Interaction with Health Savings Accounts........................... tyba 12/31/08 --- --- -0.4 -1.0 -1.3 -1.7 -2.2 -2.7 -3.2 -3.8 -44. Modify the phase-out rates for the earned income credit.... tyba 12/31/08 --- --- -0.1 -5.5 -5.8 -5.7 -6.0 -6.2 -6.6 -6.7 -7

 NET TOTAL ...................................................................................................... --- --- -13.8 -16.9 -3.7 11.7 28.8 47.9 68.9 92.6 118

Joint Committee on Taxation -------------------------------------- NOTE: Details may not add to totals due to rounding. It is assumed that the proposal will be enacted during calendar year 2007.Legend for "Effective" column: tyba = taxable years beginning after 

[1] For the purpose of preparing revenue estimates for these provisions, we have assumed that the provisions would be enacted in the order in which they are listed on the table.

TABLE 1:

ESTIMATED REVENUE EFFECTS OF THE ADMINISTRATION'S PROPOSAL TO 

Fiscal Years 2007 - 2017 

[Billions of Dollars] 

PROVIDE A STANDARD DEDUCTION FOR HEALTH INSURANCE [1]
21 

Provision 2007 2008 2009 2010 2011 2012 2013 2014 2015 20

1. Income tax revenues [1]........................................................................................... --- --- -3.8 -5.7 2.5 12.4 23.3 35.7 49.3 62. Health Insurance ("HI") tax revenues....................................................................... --- --- -1.9 -2.1 -1.1 [2] 1.3 2.7 4.2 3. Old Age, Survivors, and Disability ("OASDI") tax revenues...................................... --- --- -8.1 -9.0 -5.1 -0.8 4.2 9.5 15.4 2

 NET TOTAL ...................................................................................................... --- --- -13.8 -16.8 -3.7 11.6 28.8 47.9 68.9 9Joint Committee on Taxation -------------------------------------- NOTE: Details may not add to totals due to rounding. The date of enactment is assumed to be July 1, 2007. 

[1] Includes the following outlay effects (positive numbers represent an 2007 2008 2009 2010 2011 2012 2013 2014 2015 2

increase in outlays).......................................................................................... --- --- [3] 10.4 10.5 9.9 9.8 9.5 9.4 

[2] Gain of less than $50 million.[3] Increase in outlays of less than $50 million.

TABLE 2:

ESTIMATED REVENUE EFFECTS OF THE ADMINISTRATION'S PROPOSAL TO 

Fiscal Years 2007 - 2017 

[Billions of Dollars] 

PROVIDE A STANDARD DEDUCTION FOR HEALTH INSURANCE
22 

Total Filing Units [2] Returns Total Average Returns 

Millions Millions Billions $ $ Per Return Millions 

$10,000 and under ............................................................................................ 53.5 1.5 -0.6 -370 1.2 

$10,000 to $20,000 ............................................................................................. 20.5 5.9 -1.7 -287 2.4 $20,000 to $30,000 .......................................................................................... 17.5 10.1 -5.7 -563 2.7 $30,000 to $40,000 .......................................................................................... 14.3 8.7 -8.0 -922 2.8 $40,000 to $75,000 .......................................................................................... 11.5 6.7 -5.8 -866 2.7 $50,000 to $75,000 .......................................................................................... 20.5 10.6 -8.5 -805 6.2 $75,000 to $100,000 .......................................................................................... 12.6 6.3 -5.8 -922 4.5 $100,000 to $200,000 ....................................................................................... 15.7 7.4 -9.0 -1,224 6.5 $200,000 and over ............................................................................................................. 5.1 2.1 -3.2 -1,540 2.3 

 TOTAL ............................................................................................................... 171.2 59.2 -48.3 -816 31.3 

Joint Committee on Taxation -------------------------------------- NOTE: Details may not add to totals due to rounding. 

[1] Statistics do not include the revenue effects of the additional contributions to health savings accounts ("HSAs") that would result from enactment of the proposal.[2] Filers and non-filing units under present law.

 UNDER PRESENT LAW

TABLE 3:

ADJUSTED GROSS INCOME

DISTRIBUTION OF NET TAX CHANGES UNDER THE ADMINISTRATION'S HEALTH PROPOSAL [1]

Calendar Year 2009

RETURNS WITH TAX DECREASES RETURN
23 

Total Filing Units [2] Returns Total Average Returns 

Millions Millions Billions $ $ Per Return Millions 

$10,000 and under ............................................................................................ 52.0 1.5 -0.8 -519 1.0 

$10,000 to $20,000 ............................................................................................. 18.9 3.9 -1.1 -274 2.4 $20,000 to $30,000 .......................................................................................... 16.7 7.9 -4.2 -529 3.4 $30,000 to $40,000 .......................................................................................... 14.4 7.5 -7.3 -977 3.8 $40,000 to $75,000 .......................................................................................... 11.5 5.3 -5.3 -1,004 3.8 $50,000 to $75,000 .......................................................................................... 22.2 9.1 -8.1 -889 8.7 $75,000 to $100,000 .......................................................................................... 14.5 5.4 -5.3 -986 6.7 $100,000 to $200,000 ....................................................................................... 20.6 7.2 -9.1 -1,258 10.9 $200,000 and over ............................................................................................................. 7.1 2.2 -3.5 -1,607 4.0 

 TOTAL ............................................................................................................... 178.0 50.0 -44.6 -894 44.8 

Joint Committee on Taxation -------------------------------------- NOTE: Details may not add to totals due to rounding. 

[1] Statistics do not include the revenue effects of the additional contributions to health savings accounts ("HSAs") that would result from enactment of the proposal.[2] Filers and non-filing units under present law.

ADJUSTED GROSS INCOME

 UNDER PRESENT LAW

TABLE 3:

DISTRIBUTION OF NET TAX CHANGES UNDER THE ADMINISTRATION'S HEALTH PROPOSAL [1] - CONTINUED

Calendar Year 2013 

RETURNS WITH TAX DECREASES RETURN
24 

Total Filing Units [2] Returns Total Average Returns 

Millions Millions Billions $ $ Per Return Millions 

$10,000 and under ............................................................................................ 52.7 1.7 -1.1 -635 1.0 

$10,000 to $20,000 ............................................................................................. 17.8 2.3 -0.8 -334 2.4 $20,000 to $30,000 .......................................................................................... 15.3 5.9 -2.6 -436 3.5 $30,000 to $40,000 .......................................................................................... 14.2 6.0 -6.1 -1,018 4.6 $40,000 to $75,000 .......................................................................................... 11.7 4.3 -5.9 -1,364 4.6 $50,000 to $75,000 .......................................................................................... 23.0 6.9 -7.9 -1,144 11.1 $75,000 to $100,000 .......................................................................................... 16.0 4.3 -4.9 -1,134 8.6 $100,000 to $200,000 ....................................................................................... 25.2 6.1 -8.7 -1,430 15.7 $200,000 and over ............................................................................................................. 9.8 2.1 -4.0 -1,920 6.5 

 TOTAL ............................................................................................................... 185.5 39.6 -41.9 -1,058 57.9 

Joint Committee on Taxation -------------------------------------- NOTE: Details may not add to totals due to rounding. 

[1] Statistics do not include the revenue effects of the additional contributions to health savings accounts ("HSAs") that would result from enactment of the proposal.[2] Filers and non-filing units under present law.

DISTRIBUTION OF NET TAX CHANGES UNDER THE ADMINISTRATION'S HEALTH PROPOSAL [1] - CONTINUED

Calendar Year 2017

TABLE 3:

 UNDER PRESENT LAW

RETURN

ADJUSTED GROSS INCOME

RETURNS WITH TAX DECREASES