Spending deal would delay Cadillac Tax

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Earlier this month, the Senate approved a bill to repeal many core elements of Obamacare, including the “Cadillac tax” on high cost health plans. At the time the vote was seen as a symbolic act because the bill’s supporters lacked the votes necessary to overcome President Obama’s veto. Although Senate Democrats are opposed to repealing the President’s health reform law, there is bi-partisan support for modifying, delaying, or eliminating the Cadillac tax. Under a tentative spending agreement reached late Tuesday night, the Cadillac tax and medical device tax will be delayed for two years, from 2018 to 2020.

As originally enacted, the Cadillac tax would impose a 40% excise tax on the amount spent on company health plans above $10,200 for single coverage and $27,500 for family coverage. Supporters of the tax and many economists believe that it will encourage companies and employees to better manage their health care spending, raise revenue to offset other Obamacare costs, and increase worker’s take home pay by shifting compensation from benefits to wages. Republican opponents want to repeal the tax because they are generally opposed to new taxes and increased government regulation of employer health plans, as are their corporate supporters. Democratic opponents are pushing for repeal because they and their supporters in organized labor believe the tax will lead to a reduction in employees’ benefits without the corresponding increase in wages that economists expect.

The result is a rare instance of common cause among Congressional leaders from both parties, including new Speaker of the House Paul Ryan and Senate Democratic Leader Harry Reid. Both Wisconsin Senators Ron Johnson (R) and Tammy Baldwin (D) voted earlier this month for the reconciliation bill that would repeal the tax, although Baldwin later voted against the bill in its final form. Representatives from opposite ends of the Wisconsin political spectrum have also introduced bills that would repeal the tax – one co-sponsored by Glenn Grothman and Jim Sensenbrenner, and another supported by Mark Pocan and Gwen Moore.

It therefore appears probable that the proposed delay will have the support necessary to remain in the spending bill. A vote is expected by the end of this week. What remains to be seen is whether the delay will be truly temporary, or if it will ultimately result in eliminating the tax before it ever begins.

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