Monday's White House meeting between President Obama and labor leaders focused on one of the most contentious - and most sensible - aspects of health reform: the proposed tax on employer-provided, high-value health insurance plans. The Senate version of the health-care bill would impose a 40 percent excise tax on insurance at or above $23,000 annually in 2013; the House contains no comparable measure. This so-called Cadillac tax would be paid by insurers but presumably its costs would be passed on to those who purchase such policies, both corporations and workers.
For no particularly good reason, the U.S. tax code asks workers to pay taxes on any wages they receive - but when they receive benefits in the form of health insurance, they do not have to pay any taxes on them. This forces people who don't get health insurance at work to subsidize those who do. People in the higher tax brackets benefit the most. The system is regressive, in other words - and it encourages excess spending on health care.
Congress couldn't bring itself to correct this situation entirely, in large part because of opposition from union leaders. But the Senate, in its version of health-care reform, took a step in the right direction with its Cadillac tax. The attraction of the tax is that it raises money to pay for health reform - about $150 billion from 2013 to 2019 - while simultaneously making health reform less costly, by reducing the over-consumption of health care. Union leaders strenuously oppose even this change.
One of their arguments is that what is presented as a tax on Cadillac health plans will quickly end up covering Chevys as well. The $23,000 annual limit for a family policy ($8,500 for individuals) would increase annually, growing by the consumer price index plus one percent. The Congressional Joint Committee on Taxation estimates that fewer than 8 percent of taxpayers would be affected in 2013.
- Washington Post
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