Home > Gay Rights, health care, taxes > Google’s Decision to Pay Taxes on Benefits to Same-Sex Partners: The Infinite Regress Problem, and Other Fairness Issues

Google’s Decision to Pay Taxes on Benefits to Same-Sex Partners: The Infinite Regress Problem, and Other Fairness Issues

Google, like a small but growing number of other progressive organizations, has announced that it’s going to start paying the income taxes that its employees must pay on the value of the health care benefits that go to their same-sex partners. This is (sort of) welcome news, but it doesn’t completely work. Here’s why:

Say that Martina works for Google, and that the value of the benefits to her same-sex partner is $6,000 per year. Now imagine that, in Martina’s tax bracket, she would be taxed $1,500 (25%) on that amount. So now Google will pay that $1,500. But here’s what the stories aren’t saying: The $1,500 is itself taxable to Martina. So she now has to pay $375 (25% of $1,500) on that amount. Bottom line: She’s still paying more than her married, opposite-sex counterpart. I suppose Google could try to fix this by paying her $1875 instead ($1500+$375), but then she has to pay the tax on that amount, and so on.

I don’t expect Google or anyone else to follow this infinite regress all the way down, but my analysis demonstrates that even commendable, employer-driven efforts at equality are just patches on indefensible governmental discrimination. This tax inequity was a target of the health care reform bill, but it died when the House and Senate got together to reconcile the differences in their respective bills.

One other point, expanding on the parenthetical aside above that Google’s move is “sort of” good news: As I’ve mentioned before, there seems to me little reason for employers and insurers to tie benefits to marriage in the first place. Why not simply give each employee an equal amount in health care benefits to use as they see fit? Then those in other kinds of arrangements — elderly siblings sharing an apartment; unmarried cohabitants raising kids together, and so on — would have coverage. That’s real health care reform.

  1. JHW
    July 2nd, 2010 at 12:17 | #1

    *puts on math nerd hat*

    I have no idea what Google’s actual policy is, and it’s undoubtedly true that the ultimate problem is the discriminatory tax policy, which needs to change. But it’s not true that the infinite regress problem bars full equity, in principle. It’s actually a convergent geometric series:

    6000 + 6000(0.25) + 6000(0.25^2) + 6000(0.25^3) + 6000(0.25^4)…

    Thankfully, we have formulas for these purposes:

    6000 + 6000(0.25) + 6000(0.25^2) + 6000(0.25^3) + 6000(0.25^4)… = (6000)/(1 – 0.25) = 8000

    $8000 – (0.25)($8000) = $6000, which, of course, is exactly what she would get if the benefit were untaxed.

    (A more straightforward way of reaching this result would have simply been to find x for 0.75x = $6000. But the problem you pose is the more interesting way of looking at it.)

  2. July 5th, 2010 at 07:06 | #2

    When you order frogs legs at a restaurant what do they do with the rest of the frog ? – Well surely they just throw the rest of the frog away and take it to the tip.

    Sent via Blackberry

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