Senate Minority Leader Harry Reid (D-NV) is leading the charge to include a provision in a year-end tax package that would delay the Obamacare Cadillac tax, according to a report by The Hill.
The tax is despised by members of both parties, but health care economists and policy wonks defend it as an important cost-savings measure. Though the Obama administration has also held firm in its support for the Cadillac tax, it may be forced to swallow the delay — which would put off the implementation of the tax from 2018 to 2020 — as a part of the larger “tax extender” package that could include other extensions of tax breaks the administration favors.
Neither Reid nor House Minority Leader Nancy Pelosi (D-CA) commented for The Hill report.
But sources in the labor union community told The Hill that Reid has been pushing to delay the tax during the tax package negotiations. The pressure is on Reid after unions felt betrayed by Democrats over the free trade deal.
Labor unions abhor the tax because their health plans — which often were negotiated to be more generous in return for lesser salaries — are among the hardest hit by the tax, which would place a 40 percent tax on employer-sponsored health plans that exceed a certain threshold.
Republicans also hate the tax, for the obvious reasons that it is a tax and a provision in Obamacare.
A show-vote on a measure to repeal the tax passed 90-10 in the Senate earlier this month, as part of larger Obamacare repeal legislation certain to be vetoed by the President.
Health care economists, however, warn that the tax is an important revenue raiser and also designed to keep health care costs low, one of the major goals of the Affordable Care Act. The policy notion behind that tax is twofold. First, employer-provided health insurance is excluded from income and payroll taxes which costs the government revenue. Second, taxing higher cost plans will encourage employers to offer less generous plans that in turn prompt consumers to use health care more sparingly. That would lead to more competition and efficiency in the industry, economists say.
Cadillac tax defenders fear that if the tax is delayed once, delaying it will become the norm, effectively ending the tax before it even goes into effect.