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McDermott seeks to end tax inequity in health benefits for domestic partners SGN speaks with McDermott Thursday
McDermott seeks to end tax inequity in health benefits for domestic partners SGN speaks with McDermott Thursday
by Robert Raketty - SGN Staff Writer

Rep. Jim McDermott (D-7th) introduced The Tax Equity for Health Plan Beneficiaries Act in the U.S. House of Representatives on Thursday. The legislation seeks to rectify an inequity in the tax law, which penalizes employees who extend their employer's health care benefits to their domestic partner.

"Basically, it's a question of fairness," McDermott told the Seattle Gay News on Thursday. "I just think that every American deserves to be treated with dignity and respect and equal treatment under law. ... There has been a real inequity for a long time and it's time to do something about it."

Currently, an employee who is married is not taxed for the employer contribution to the health care of a spouse. However, a contribution to the health care of a domestic partner of an employee is taxable, because it is considered wages under the Internal Revenue Code.

McDermott had introduced similar legislation in the 107th and 108th Congresses. However, the bill gained little traction. "I actually talked to the Chairman [of the House Ways and Means Committee], Bill Thomas [R-CA], a couple of times. He said he liked it. He thought it was a good idea, but he just never got around to it," he explained.

This session (110th Congress), the balance of power now lies in the hands of Democrats. Therefore, McDermott suggests, the bills chances have greatly improved.

"All of us are excited about the possibility of doing some of the things that we always thought ought to do done but just never got done. So, now, we are in a position to make some of this stuff happen," he said. "I do think it is one of those things that should have been done a long time ago. That is the reason you will find, in this session, that there is going to be a real effort to make this happen."

However, fiscal concerns could pose a challenge to McDermott's effort. "There is obviously the problem of how much money it is going to cost. We will have some difficulty because of that, but I don't think it's insurmountable. I do think we will ultimately adjust," he added. "The Republicans have left us with an enormous amount of debt. Anything we try to do that costs money is a problem. From that standpoint, it is not going to be easy."

The Business Coalition for Benefits Tax Equity, which includes 30 companies across the country who offers domestic partner benefits to employees, are backing McDermott's legislation. Washington State companies such as Boeing, Microsoft, Starbucks, Nordstrom, Safeco and Washington Mutual also provide such benefits.

"There are lots of businesses who want to treat their domestic partner arrangements fully with marital situations and so they are really interested in doing this..." said McDermott.

Jack Krumholtz, managing director of Microsoft's federal government affairs, agreed. "Microsoft's benefits program for domestic partners is an essential component of our culture of respect for all employees," he said, in a written statement. "Unfortunately, the taxation of these benefits creates an unnecessary financial burden for our employees. We support Rep. McDermott's efforts to correct this unequal taxation."

The Human Rights Campaign also backs the bill, according to the organization's President, Joe Solmonese. "This legislation to provide equitable tax treatment to all employees, regardless of their sexual orientation, is as fair and common-sense as it gets," he said. "Over half of Fortune 500 companies now offer domestic partner health benefits to their employees and there is no logical reason why these benefits should be taxed any differently. This bill is a win, win proposal for both workers and businesses."

McDermott, chairman of the House Ways and Means Income Security and Family Support Subcommittee, and a member of the Select Revenue Subcommittee, said he hopes to build a bi-partisan coalition to work for passage of his legislation.

"I think that the more support that we have from members of Congress, the more likely it is to happen," concluded McDermott. "But, the [LGBT] community aught to be on the horn. They ought to be making contact with people [in Congress] and making sure that they know that this bill is in, get them to sign on it, and go after it. ... I think there is quite a bit of real possibility of helping the situation out if people get busy."

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