Center for American Progress

Tax-Free Health Insurance Is Single Largest U.S. Tax Break
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Tax-Free Health Insurance Is Single Largest U.S. Tax Break

Tax-free health insurance is the single largest tax break in the United States, estimated to cost the federal government more than $1 trillion over the next five years in foregone revenue.

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Tax-free health insurance is the single largest tax break in the United States, estimated to cost the federal government more than $1 trillion over the next five years in foregone revenue.

CAP has argued that tax expenditures are essentially spending programs that are administered by the IRS. They therefore should be evaluated alongside direct spending programs that serve similar purposes.

The tax exemption for employer-sponsored health insurance is a rare example of a tax expenditure that was considered in the context of overall health care reform. The Patient Protection and Affordable Care Act of 2010 makes important changes to the tax treatment of health care as part of more comprehensive changes to expand affordable health coverage and slow the growth of health care costs. In the column mentioned below, we will consider the role and effectiveness of the tax exclusion for employer-sponsored health insurance in promoting health coverage, as well the effects of the recent reforms.

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