Archive for the ‘taxes’ Category

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

July 1st, 2010 2 comments

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.

Tax Court Offers Valuable Public Education on Gender Identity Disorder and Sexual Reassignment Surgery

February 3rd, 2010 No comments

Yesterday, the U.S. Tax Court overturned a determination by the IRS that sexual reassignment surgery doesn’t qualify as a deductible medical expense within the meaning of the Internal Revenue Code (and the regulations implementing it). (A copy is here.)

In a long decision that came with several concurring and dissenting opinions (and ran a total of almost 140 pages), the court offered a clear and sympathetic portrayal of the life of the woman, born as a man, whose life-long battle with gender identity disorder (“GID”) culminated in sexual reassignment surgery. Much of the decision is taken up, appropriately, with a discussion of whether the tax law views such surgery as as a qualified medical expense, but the court also was at pains to detail the life, and the course of medical and psychological treatment, that the petitioner had undergone.

The majority opinion is good public education. It walks the reader through the medical community’s evolving view of this disorder, the step-wise approach taken to dealing with this disorder (which can sometimes stop at hormone therapy), and the improved psychological outcomes for those successfully treated. The court makes the medical and psychological communities’ evolution comprehensible, and shows why federal public policy — tax policy, in this case — should follow these experts’ views on medical issues.

But the education isn’t complete without one of the concurring opinions. Judge Holmes’s opinion (the second of the concurring opinions, beginning on page 82) would have decided the issue without answering the contested question of whether the procedure was “medically necessary.” But since the majority had discussed the medical and psychological issues in such detail, Holmes felt compelled to offer a competing view of sexual reassignment surgery, noting that the medical community is in conflict on the issue, and that experts disagree about gender confusion. Some find those so affected “delusional,” others believe that the condition is a social construction, some think it’s a form of erotic attachment, and, as Holmes conceded, the predominant view is as expressed by the majority: that GID is a medical disorder that requires varying levels of intervention, depending on severity. Unlike the disrespect toward the petitioner that the dissenters could barely conceal, Judge Holmes tried instead to flesh out the full debate about gender identity disorder.

A tax court decision might seem like an unlikely place for such a discussion, but it’s not. Tax law is policy and judgment as much as it is statutory and regulatory interpretation, and tax law affects everyone — including those who are gender non-conforming. Of course, this case would never have surfaced had the sex reassignment surgery been covered by insurance, because then there would have been no (or not enough) expenses to deduct. But insurance policies don’t typically cover such surgery. Perhaps this opinion will start a conversation about whether they should.

Death, Taxes, and Gay Couples

December 6th, 2009 No comments

This Huffington Post entry by Michael Steinberger makes a point that’s hard to argue with from a formal fairness perspective. Steinberger and co-author Naomi Goldberg note that current efforts to fix the estate tax — now slated for a one-year repeal, followed by rebirth at a higher rate — don’t do anything to equalize same- and opposite-sex married couples. While a surviving spouse in an opposite-sex marriage enjoys an unlimited exemption from the estate tax, a similarly situated same-sex survivor must pay a 45% tax on any income over $3.5 million — the same rate that applies to unmarried people. Citing data from the Williams Institute, the authors estimate that this inequality will have cost same-sex couples an extra $3.5 billion over the decade ending in 2011.

Blame DOMA. Even same-sex couples legally married in their home states don’t count as “married” under federal law, tax or otherwise. Effectively, they’re single.

But the authors’ view is myopically focused on the inequality between married couples, and misses the larger issue: Is an unlimited spousal exclusion justified in the first place? Remember, up to $3.5 million is exempt from the tax.  So we’re talking about protecting even more money for the benefit of  survivors who, I’m going to guess, often have many other sources of income besides their inheritance from a spouse. Is this good policy? Is that much money needed? Should there be no limit on the exemption?

And why should it be tied to marriage at all? I can think of plenty of other situations where a testator and a beneficiary are in a financially and emotionally intertwined relationship, where an exemption would protect the survivor just as surely as in the case of married couples. Life-long friends, elderly siblings living together, and an adult “child” caring for a parent (where the offspring dies first) are just a few of the cases illustrating that the (straight) “marriage takes all” rule fences out many people who might need help.

Once again, marriage is being used as a way to achieve a social good. And once again, it’s a poor proxy for the many kinds of situations that affect actual people.

Log Cabin (Republican) Syrup

April 23rd, 2009 1 comment

A gay friend of mine moved from New Haven, CT (he was a Yale professor) to Columbus, Ohio for a year. His dating life, he told me, was a disaster: “Every guy I met told me on the first date that he was a Log Cabin Republican.” There were no second dates.

For  those who don’t know, the Log Cabin Republicans are a gay advocacy group that, roughly, adheres to certain “old school”  Republican values like lower taxes and limited government (federalism, as convenient, too) while pressing for LGB (but not always T) equality. They’re mostly a bunch of well-to-do white guys. Their argument for existence is that they can work within to transform the Republican Party in what is, after all, a two-party system.

I’m not one of them. My politics are decidedly to the left, and I generally favor a substantial role for government in working towards social justice (while realizing the limits of this reliance, the benefits of markets,  and the importance of grass roots advocacy and effort). And my  view of the group wasn’t exactly improved after an argument in 2004 with one Log Cabin member who, to my astonishment, supported Bush over Kerry, even asserting that there was “no difference” between them on gay issues. We were (not close)  friends before this, not at all after that.

But there he was in late 2008, at a March for Equality in Philadelphia. We walked together. He stated that he’d been an Obama supporter, and that the Republican party was in danger of becoming a “fringe.” I then regretted my boorish behavior in 2004 (I wasn’t exactly civil, I’m afraid) and sent him an email of apology. His response was more than gracious, and he owned some responsibility, too. I wisely refrained from asking about his continued association with the Log Cabin.

Now I’m feeling a bit more charitable towards the group. A recent story reported that the Log Cabin had been involved in getting the leadership of the Republican Party in the New York Senate to allow its members to “vote their conscience” on the pending marriage equality bill. Given that at least four Democrats are poised to vote “no,” this step could spell the difference between success and failure. It would be neither fair nor charitable to deny that the group has had success in galvanizing what’s left of the moderate wing of the Republican party; as a sign of their effect, they and Meghan McCain apparently have a thing goin’ on, too. If she’s the face of young Republicans (or at least enough of them), then we can have a legitimate debate about policy that takes equality as a given and moves on from there.

But I’m still not syrupy sweet on the Log Cabin. They support formal equality, and their blog lists some recent accomplishments at the state legislative level that are, frankly, impressive. But what about addressing the deep and underlying inequities of race, gender, and even sexual orientation  and gender identity? Formal equality doesn’t really get to those messier issues. Marriage equality won’t help an adult woman who needs time off to take care of her ailing sister or grandchild, neither of whom is covered by the Family and Medical Leave Act. A law prohibiting discrimination in the workplace doesn’t address the issue of whether employees make a living wage.

But they’re not the only group that focuses on formal equality, and, if I’m being fair about it, they seem to be making more inroads lately than the national, non-partisan Human Rights Campaign, whose efforts on hate crimes, anti-discrimination laws, and repeal of the Defense of Marriage Act have yet to bear fruit. (Here’s an example of their behind-the-scenes achievements, though.)

So am I ready to enter a post-partisan era? Nah.

Exact Change is Appreciated

March 1st, 2009 No comments

This coming Thursday the California Supreme Court will be hearing oral arguments in the case challenging the validity of Prop 8, which purported to rescind the marriage equality that the court had granted in May of 2008. So I will offer a Blog in Three Acts, running Wednesday, Thursday and Friday.

I have at least one serious topic to post before that, but for today I thought something lighter (it is the weekend) might be in order. How about the imminent, and likely utter, collapse of the American and global economies. (Think I’m exaggerating? I would have thought the same before I listened to this downer of a show. “Bad Bank,” Feb. 27-March2).

Yes, there is a lighter side. As you may have read, many states are trying to come up with novel revenue sources, suggesting taxing “things” from marijuana sales (yes, even though they’re illegal) to prostitution (legal in certain parts of Nevada) to pornography. (This last met with unexpected resistance, when the lawmaker who dared suggest it was besieged with phone calls by “people call[ing] up saying their marriages would fall apart.” And we’re worried about same-sex unions?) Apparently, taxpayers won’t put up with increases in the sales or state income taxes, but taxing what were once vices [but] are now habits can be slipped past the populace.

Clearly, government is taking its cue from private industry, and here airlines are the best model. On Thursday, our family flew from Philadelphia to Orlando. As this was my first flight since a year ago at this time (we’re now bound to visit both sets of grandparents annually), I wasn’t fully aware of how comically irrelevant the actual air fare (cheap!) has become.  Here are some of the a la carte charges:

  • You’ll be charged for each checked bag. Thinking about not checking a bag? Gone are the days when people successfully carried on sarcophagi large enough to accommodate floor lamps, toolsheds, and the occasional deceased relative. Now the bin into which the putative “carry on” must fit holds approximately seven (7) M & Ms.
  • Soft drinks on USAirways are $2. Cocktails, which sold briskly, cost $78.50.
  • Want a blanket? Leg room? You’ll pay. People with leg room need larger blankets, of course, and these cost double.
  • Oxygen masks are a reasonable $17. When there was a sudden drop in air pressure, I was delighted to learn that kids under age six (we have four-year-old twins) get a two-for-one-deal. The guy next to me, apparently willing to play the odds, neglected to bring exact change. His heirs have learned a valuable lesson.

I’d write more, but I’ve run out of quarters to deposit in the side of my computer.