By NextBestFitFederal income tax on former premium dollars (new)
Health premiums were paid with untaxed dollars. Now $529.4B in compensation that used to be premiums is paid as taxable wages. This recaptures most of the roughly $400B/yr federal tax subsidy for job-based insurance (CBO).
Result
$95.3B
$0.0B → $95.3B
Per resident, per year
$279
÷ 341.1M people
Per household
$721
÷ 132.2M households
Range
$87.5B–$100.0B
Lean and costly scenarios.
How it's calculated
| # | Step | Arithmetic | Value |
|---|---|---|---|
| 1 | Employer premiums paid in 2024 (private + federal + state & local) Sources: CMS Office of the Actuary (2025) | $753.1B + $46.7B + $246.8B | $1.05T |
| 2 | Minus the new employer payroll tax | −$873.4B | |
| 3 | Employers' net savings | $173.2B | |
| 4 | Share passed to wages (85%) | $173.2B × 85% | $147.3B |
| 5 | Plus worker premiums that used to be deducted pre-tax Sources: CMS Office of the Actuary (2025) | $382.1B | |
| 6 | Newly taxable wages | $529.4B | |
| 7 | Federal income tax at 18% | $529.4B × 18% | $95.3B |
| 8 | Side effect (outside health): state income tax at 3.5% | $529.4B × 3.5% | $18.5B |
| 9 | Side effect (outside health): Social Security tax at 12.4% | $529.4B × 12.4% | $65.6B |
Inputs used
| Input | Kind | Value |
|---|---|---|
| Employer savings passed to wages | estimate, medium confidence | 85% |
| Average federal income tax rate on newly taxable compensation | estimate, medium confidence | 18% |
| Average state income tax rate on newly taxable compensation | estimate, medium confidence | 3.5% |
| Social Security payroll tax (employer + employee) | data, high confidence | 12.4% |
Trade-off: A new, visible tax replaces premiums and out-of-pocket costs. It is proportional to income or payroll instead of flat per person.
Sources: CMS Office of the Actuary (2025)