(February 4, 2008) The Senate Revenue and Taxation Committee will be considering a California Chamber of Commerce-supported bill that will reduce the tax inequity resulting from individuals buying their own health care insurance or coverage.

SBX1 23 (Ashburn; R-Bakersfield) provides a small tax credit to employers to establish Section 125 cafeteria plans that allow employees to purchase health insurance with pre-tax income.

Section 125 plans under federal tax law may include a provision for employees to purchase health care coverage with pre-tax income, thus lowering their taxable income and tax liability.

Under current tax law, employers may deduct the cost of purchasing health care coverage for their employees, but employees purchasing their own health care coverage must do so with after-tax income, unless they participate in a Section 125 Premium Plan.

SBX1 23 provides an incentive for employers to offer these valuable plans as a benefit to employees by offsetting employers’ costs of administration through a small tax credit.

Key Vote

The bill passed the Senate Health Committee on January 17 by a vote of 6-2:

Ayes: Aanestad (R-Grass Valley), Alquist (D-San Jose), Cox (R-Fair Oaks), Maldonado (R-Santa Maria), Negrete McLeod (D-Chino), Yee (D-San Francisco).

Noes: Kuehl (D-Santa Monica), Steinberg (D-Sacramento).

Absent/abstaining/not voting: Cedillo(D-Los Angeles), Ridley-Thomas (D-Los Angeles), Wyland (R-Del Mar).

Action Needed

A Senate Revenue and Taxation hearing date on SBX1 23 has not yet been scheduled.

The CalChamber is encouraging employers to contact their senators and committee members to urge them to support SBX1 23.

A sample letter is available at www.calchambervotes.com.

Staff Contact: Marti Fisher

Additional Materials

Health Care