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Notes on US family income taxes vs. health care costs

Based on self-reported US Bureau of Labor Statistics (BLS) household expenditure data, not directly comparable to KFF family data.   Taxes & health expenditures are shown here as % of before-tax income for the middle household income quintile [40%-60%].

Direct health-related costs are about 10% of middle-income families’ spending.  In addition, about half of those families’ federal income & payroll taxes pay for government health spending (Johns Hopkins study, 2019: 27% fed. spending on Medicare, 11% Social Security for health costs, 10% Medicaid, 5% VA/Military healthcare, employer health insurance tax deductions, debt interest, etc.).

Added together, total health-related costs for the middle income quintile approach 15% of income, according to BLS data—which is also the percentage calculated by KFF for a family of four with a $50,000 income and employer coverage (Health System Tracker, KFF, 2017).

Note that major income tax cuts since 1980 have not kept families even—they have not compensated for the huge increase in their health costs—nor can they do so, because health costs are now so much bigger than non-health income taxes.

(Also, as Warren Buffett commented in 2017: businesses (& their lobbyists) have focused too much on lowering corporate taxes and not enough on reducing health care costs.)

Taxes as categorized by BLS consist primarily of federal, state & local income taxes, & exclude social security tax, real estate property tax & sales tax. Health costs include all household health expenditures incl. insurance & out-of-pocket spending on health care. Source: BLS Consumer Expenditure Survey, 1980 & 2019. Notes on changes in BLS modeling in 2004 & 2013.

Also, according to national polling: “most people (59%) say they live in a family with someone who has a pre-existing or chronic health condition. About half say they are worried someone in their family will not be able to afford health coverage (54%) or would lose coverage (51%) if the ACA were overturned.” KFF Poll, October 2020.

(See latest notes in most recent HFUS slides.)

Notes @07/29/2023