It goes without saying that delaying a scheduled tax increase is a tax cut. According to the Joint Committee on Taxation, a two year delay of the Cadillac tax combined with deductibility will save taxpayers $20 billion over the next decade. Conservatives are for tax relief.
Conservatives are for repealing ObamaCare, in whole or in part. The Cadillac Plan excise tax is a part of how ObamaCare’s latticework of subsidies and regulations is supported. Delaying on the road to repealing parts of the ObamaCare law is good public policy. Eventually, we want to repeal and replace all of ObamaCare.
Health insurers nabbed a victory in the $1 trillion spending bill unveiled late Tuesday night, earning a one-year freeze on the so-called premium tax. The tax has been strongly opposed by insurance companies and business groups, who argue that the cost of the tax is passed on to workers in the form of higher premiums.
The House reached a deal late Tuesday on a $1.1 trillion spending bill and a huge package of tax breaks. Throughout Tuesday, major components of the spending legislation appeared to be falling into place, including an agreement to alter major provisions of the Affordable Care Act, delaying a planned tax on high-cost health insurance plans and suspending a tax on medical devices for two years. Lawmakers also agreed to delay the Cadillac tax on high-cost employer-sponsored health plans by two years, originally scheduled to take effect in 2018.
The tax policy in the ACA is inefficient, at odds with the objective of raising revenue with as minimal interference on economic decisions as feasible, and not supportive of long-term growth. The overwhelming economic burden of the ACA taxes will fall on those in the middle-range income brackets. These are among the reasons that Senate conservatives used the recent reconciliation bill to repeal every single one of the ObamaCare taxes. Unfortunately, the president is expected to veto this effort.
Conservatives may get another bite at the apple – albeit with less than perfect policy – in the so-called extenders bill now before Congress. Specifically, reports indicate that the bill would provide for a 2-year halt of the medical device tax, a 2-year delay of the Cadillac tax, and a 1-year moratorium of the “premium tax” (the annual fee on health insurers).
The two-year “Cadillac tax” delay under consideration by Congress is the worst kind of special-interest legislation. It will enrich labor unions and big business at the expense of taxpayers. ObamaCare’s Cadillac tax is a clunky but constructive first step in reforming the employer tax exclusion. It has problems—its structure as an excise tax is punitive, and it contains carveouts for favored Democratic constituencies—but the basic idea of equalizing the tax treatment of employer- and individually-purchased health insurance is a good one.
The 2015 United Auto Workers union contracts with General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV allow the companies to alter hourly-worker health plans if they are likely to trigger a 40% federal tax on some high-cost health-care plans. The most likely change: adding yearly deductibles for affected workers.
Individuals who do not obtain health coverage, through any source, are subject to a tax penalty unless they meet certain exemptions. The penalties under the so-called individual mandate were phased in over a three-year period starting in 2014 and are scheduled to increase substantially in 2016. This analysis from the Kaiser Family Foundation provides estimates of the share of uninsured people eligible to enroll in the marketplaces who will be subject to the penalty, and how those penalties are increasing for 2016.
Those without health insurance have a lot to consider. On one hand, the fine for remaining uninsured steeply increases for next year. On the other, the cost of the individual mandate penalty is cheaper than buying the least expensive insurance plan for 7.1 million of the nearly 11 million uninsured eligible to enroll in health exchanges, according to a Kaiser Family Foundation analysis released Wednesday.
The penalty for failing to have health insurance is going up next year, perhaps even higher than expected. Among uninsured individuals who are not exempt from the ObamaCare penalty, the average household fine for not having insurance in 2015 will be $661, rising to $969 per household in 2016, according to a Kaiser Family Foundation analysis.
According to a new Mercer study of 134 large employers (5,000 or more employees), 15% say that their onsite or near-site worker clinics will push them into the bracket where they will be required to pay the Cadillac Tax. But most of the respondents, 46%, either didn’t know how the clinics will affect their Cadillac tax status or didn’t think there would be an effect (28%).