The Cadillac Tax Gets a Realignment

Fri, 15 Jan 2010 12:57:13 +0000

Some will say that the new deal reached on the tax on so-called Cadillac health care plans is a giveaway to unions -- and they won't be wrong -- but in isolation it is a step toward "the least worst way to do the wrong thing," which is what passes for success in Washington these days.  Buried in The Washington Post article by Lori Montgomery and Robert D. Shear:

The deal cut Thursday would raise the value of policies subject to the tax to $24,000 for families and $8,900 for individuals. Plans with significant numbers of women or older workers would receive an additional break, as would workers in high-cost states and high-risk professions. Dental and vision plans would be exempt starting in 2015. And workers with collective-bargaining agreements and government employers would be exempt until 2018, giving labor leaders time to negotiate new contracts.

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The improvement is that the tax burden will now recognize differences in underwriting costs, which was the source of my objection to it.  The giveaway is that unions are being rewarded with a delayed implementation for the fact that they explicitly bargain over fringe benefits.  I would hazard a guess that all workers who have health insurance bargain over it, at the expense of wages or other forms of compensation.  I say "in isolation" because the estimated $60 billion cost of relaxing this tax is expected to be offset by "by applying Medicare payroll taxes to investment income for families earning more than $250,000 a year."  I'm with Jim Glass on this one.