The complaint is that (1) there is an effective tax hike (2) that is used to cover tax cuts for already well-off demographic.
Plenty of people would be fine with point 1 as long as the money is used to help to country / lower the deficit / pay national debt / invest in infrastructure. But people are unhappy with point 2 - the money is used to fund tax-cuts for the super rich.
But I do agree that this is the stupidest, pettiest loophole to close, especially because it's funding cuts of people who absolutely do not need them.
But some people would argue that health benefits should be taxed. We debated taxing employee benefits in Canada briefly. When an executive gets a $500k salary and $500k in benefits, should they be taxed as earning 1mil?
Likewise, the health insurance money is making me whole after an analogous loss to my health.
That's basically the definition of "not income". If you "pay me" $5 and then "charge me" $5 for the privilege of being in the same room with you, you just moved money from your left hand to your right hand. It was your money the whole time, so I shouldn't owe any taxes on it.
Specifically, the problem here is that, roughly, you would actually pay me $20, then move $40 from your left hand to your right, and then the government would charge me tax on $60. You're actually tripling my income-tax burden while increasing my real pay not a penny.