Upjohn Institute Working Paper No. 96-45
In Tax Reform: Implications for Economic Security and Employee Benefits, edited by Dallas L. Salisbury. Washington, D.C.: Employee Benefit Research Institute, 1997, pp. 27-34
The current tax treatment of pensions and health insurance in the United States is a hybrid that lacks consistency under either an accrual income tax system or a consumption tax system. Under an accrual income tax, employer contributions to pension plans represent an addition to wealth that would be taxed at the time they are made. The interest earned on pension contributions also represents an addition to wealth that would be taxed annually. When a worker retires, all applicable taxes would already have been paid on the benefit, and the flow of retirement income received by the worker would not be taxed. Similarly, employer-provided health insurance arguably represents a current benefit that, under the income tax, should be taxed annually as current income.
Revised July 1996
Revision of a paper prepared for the Employee Benefit Research Institute Policy Forum on "Comprehensive Tax Reform: Implications for Economic Security and Employee Benefits," Washington D.C., April 30, 1996
LABOR MARKET ISSUES; Retirement and pensions; Wages, health insurance and other benefits; Health insurance
Woodbury, Stephen A. 1996. "Employee Benefits and Tax Reform." Upjohn Institute Working Paper No. 96-45. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research. http://dx.doi.org/10.17848/wp96-45