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Kozi Checks & Balances TaxTactics News

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October 03.2025

2 Minutes Read

How Limiting the Tax Exclusion for Employer-Sponsored Health Insurance Can Benefit Everyone

Healthcare document with stethoscope and pen, symbolizing health insurance.

The Tax Exclusion for Employer-Sponsored Health Insurance: An Overview

The exclusion of employer-sponsored health insurance (ESI) premiums from federal income and payroll taxes has been a long-standing practice in the U.S., dating back to World War II. This exclusion currently costs the federal government an estimated $5.9 trillion over the next decade, as projected by the Treasury Department. It incentivizes employers to provide health insurance rather than boost taxable wages, effectively encouraging higher health care outlays.

Future Predictions: Revenue Implications of Limiting ESI Exclusions

Recent analyses indicate that reforming the tax exclusion could generate significant federal revenue—up to $389 billion over the next decade—mainly from high earners. By limiting ESI exclusions at the 80th or 90th percentiles of premiums, policymakers could reinvigorate federal finances while tackling the rising burden of healthcare costs, which are anticipated to increase over 9% in 2026. This reform would redistribute some financial responsibility from the taxpayers back to those benefitting from generous health plans.

Understanding Healthcare Subsidies: Costs and Consequences

Healthcare subsidies have historically aimed to make health insurance more affordable, but their unintended consequences can inflate overall costs by boosting demand without addressing supply. The shift towards untaxed ESI benefits contributes to escalating healthcare prices, resulting in a greater financial strain on the federal budget. To tackle this, any expansion of premium tax credits must be counterbalanced by adjustments elsewhere, particularly by reducing the ESI tax exclusion.

Opportunity Trends: Potential for Reform

Experts from organizations such as the Tax Policy Center suggest several reform routes: outright repeal of the ESI exclusion, limiting it above certain premium levels, or substituting it with a refundable tax credit. These approaches would not only modify income distribution impacts but also address the root causes of soaring healthcare expenses. Implementing these changes could promote a more equitable tax system while potentially decreasing premiums in the long run.

Why This Matters: The Broader Implications

The discussion surrounding ESI exclusion reform goes beyond mere tax policy. It reflects deeper questions about healthcare access, economic equity, and the future of employer-sponsored coverage. With a reform strategy that normalizes compensation packages and curtails excessive health care costs, society can move towards a more sustainable healthcare landscape, potentially benefiting consumers and taxpayers alike.

Tax Deduction Deep-Dives

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10.02.2025

How Will the One Big Beautiful Bill Act Affect Your 2026 Taxes?

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10.01.2025

Navigating Investment Taxation: Insights on OECD and EU Account Treatments

Update Understanding Investment Taxation in OECD and EU Countries The treatment of investment income is a critical aspect of both individual financial planning and national economics. In the OECD and EU countries, long-term capital gains—from the sale of stocks and shares—average a tax rate of approximately 18.19%, while dividends are taxed at about 22.87%. This creates a challenging environment for individual savers, who often face a double taxation system: taxes on corporate income before stockholders see their returns, and then taxes on those returns themselves. The Double Taxation Dilemma Investment income typically incurs taxes at two separate levels. First, corporations pay taxes on their profits, and shareholders then face capital gains and dividend taxes on what is distributed from those profits. This dual-layer taxation can discourage savings, making it less appealing for individuals to invest long-term. Ideally, capital gains on investments should only be taxed once to encourage economic growth and personal wealth accumulation. Tax Preferences for Retirement Accounts In response to this taxation challenge, many countries offer tax incentives for private retirement accounts. These are structured to exempt taxes on contributions or returns, which significantly benefits savers aiming for financial security. In the U.S., for example, about 30% of total equity is invested in these tax-preferred retirement vehicles, significantly impacting national savings rates. The Case for Simplification: Universal Savings Accounts Despite the benefits of tax-preferred accounts, complexity often emerges in their setup, imposing various limitations that can deter individual participation. An alternative being discussed is the introduction of universal savings accounts, which could simplify the savings landscape. These accounts could allow tax-free growth without restrictions on withdrawals, thus encouraging more people to save for retirement and other future expenses. Comparative Tax Analysis: A Global Perspective The global landscape of capital gains and dividend taxes shows stark differences based on jurisdiction. For instance, some countries, like Belgium and Luxembourg, offer tax exemptions on long-term capital gains, while others, such as Denmark and Chile, impose much higher rates. Understanding these variances allows for better strategic planning for investors, whether they operate within national borders or internationally. In conclusion, the current tax treatment of investments and retirement savings poses significant barriers, but recognizing and potentially reforming these structures could improve financial outcomes for many. Advocating for simplified savings options and reduced tax liabilities can cultivate a culture of saving, enhancing both individual and economic prosperity.

09.19.2025

Will the G7's Global Minimum Tax Give US Multinationals Competitive Edge?

Update Understanding the G7's Global Minimum Tax SolutionThe recent G7 accord on a global minimum tax represents a significant shift in international tax policy, raising questions about its implications for businesses, especially U.S. multinationals. While one key component of the agreement—a "side-by-side" solution—excludes U.S. companies from some of Pillar Two's rules, it remains to be seen whether this truly offers an advantage over competitors from other G7 nations.The Complexity of Compliance CostsOne of the most pressing concerns surrounding this tax agreement is the compliance costs associated with different tax systems. The U.S. tax code is notoriously complex, with recent IRS estimates projecting taxpayers will incur substantial out-of-pocket expenses to comply, totaling nearly 1.8% of GDP by 2025. This complexity could inherently disadvantage U.S. companies compared to their counterparts in jurisdictions with more streamlined processes.Evaluating Competitive EqualityIf we assess U.S. multinational corporations under the lens of competitiveness, the dynamics—such as U.S. domestic corporate tax rates and compliance burdens—become critical factors in evaluating potential advantages. Despite having a corporate tax rate of 21% coupled with a minimum alternative tax of 15%, the U.S. cannot simply be categorized as a tax haven. Its intricate regulations, however, may impose a heavier burden than the rules envisioned by Pillar Two.Potential Double Taxation IssuesWithout a clear side-by-side framework, U.S. firms may still risk facing double taxation due to inconsistencies in international tax crediting practices. Historically, U.S. multinationals might encounter heightened scrutiny under Pillar Two provisions, necessitating a thorough understanding of both domestic and international tax statutes to mitigate risks and avoid excess taxation.Conclusion: A Double-Edged Sword?Ultimately, while the G7's agreement on a global minimum tax can herald beneficial changes in how multinationals are taxed across borders, it's essential to approach its implementation with caution. Companies may find themselves navigating a battleground of complexities, where the anticipated advantages of compliance may be counterbalanced by the challenges posed by the components of this deal.

How Limiting the Tax Exclusion for Employer-Sponsored Health Insurance Can Benefit Everyone

The Tax Exclusion for Employer-Sponsored Health Insurance: An Overview

Future Predictions: Revenue Implications of Limiting ESI Exclusions

Understanding Healthcare Subsidies: Costs and Consequences

Opportunity Trends: Potential for Reform

Why This Matters: The Broader Implications

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