The proposed excise tax on “Cadillac” health care plans is raising a lot of controversy. Opponents, like Health Care for America Now (HCAN), believe that it might affect middle class Americans and instead, urge increasing the income tax on families making more than $250,000 per year. They’re touting their plan with ads like this one:
The commercial is paid for by HCAN, which is a section 501(c)(4) issue advocacy organization. The organization describes itself as “a national grassroots campaign of more than 1,000 organizations in 46 states representing 30 million people dedicated to winning quality, affordable health care we all can count on in 2009.”
It’s Fix the Tax Code Friday! This week, health care reform is in the news again, this time with a focus on the proposed excise tax for high-premium insurance plans.
The latest proposal for health care reform includes a controversial excise tax for high-premium insurance plans which exceed certain thresholds. Much of the concern, especially as put forth by union groups, focuses on the idea is that the thresholds are too low.
The proposed threshold are $8,000 for a single person or $21,000 for a family per year. For workers in high-risk jobs and retirees over the age of 55, they are $9,850 for a single person and $26,000 for a family per year.
This week, 157 House Democrats (which for math junkies like me, who want to know the actual percentage of House Dems who signed, it’s 62%) signed a letter which put House Speaker Nancy Pelosi (D-CA) on notice that an excise tax on high-cost health care insurance plans is not acceptable. Those who signed the letter believe the tax will hurt many middle class families.
So what exactly is the excise tax? Here’s the scoop: Max Baucus (D-MT) has proposed a 40% tax on so-called “Cadillac” employment-based health insurance plans. Currently, the proposal would define those high-cost plans as plans which exceed $8,000 for a single person or $21,000 for a family per year. The tax would apply to the amount over the cap. So, for example, a $10,000 plan for a single person would be subject to an excise tax of $800 (40% of the overage).
All taxes involve some kind of “and, if or but” and this one is no exception. The cap is raised for plans for workers in high-risk jobs and retirees over the age of 55. Those caps would be $9,850 for a single person and $26,000 for a family per year.
I was astonished to see those kinds of numbers. Those caps for health care benefits are equal to roughly twice the annual salary for minimum wage employees. Surely, those would be reserved for the top 1 or 2% of employees. Not so. The Joint Committee on Taxation has estimated that those caps would still affect 15% of employment-based health insurance plans in the first year alone. That’s a lot of taxpayers.
My gut is that if the excise tax does go forward, we’re going to see those caps go up significantly. But I also believe that if the cap goes away completely, everyone goes back to the table to start from (nearly) scratch. Paying for health care reform is a huge part of the bill and without that piece, it’s not going to move forward. In fact, President Obama has indicated that he will not sign a version of the bill which increases the deficit.
So all eyes on Pelosi to see what the response will be… I’ll keep you posted!
I have seen a lot of articles in the paper about taxing sodas and foods that are bad for you. I say, “Why not?”
I used to be a smoker. At one point, I was up to two packs a day. When New Jersey raised their cigarette tax, I stopped because my cigarettes were almost twice as expensive as when I had started smoking. I couldn’t afford it anymore. You know what? It was the right choice. I am healthier today because I stopped smoking. And I might not have done it if cigarettes were the same price as before.
I think this idea of taxing unhealthy behavior is a smart one. I think we should tax things that make us sick: cigarettes, alcohol, fatty foods and sugary foods. I know that people don’t like the idea of the government telling them that they shouldn’t do things like eat foods that are bad for you but all of these things are adding to our health care problem. I don’t think it’s fair that I should have to pay for health care for people who didn’t stop smoking or who eat too much. And I have read that most of the cost of health care in the US is to pay for diseases and sicknesses that could have been prevented with a better lifestyle.
I’m not saying that you shouldn’t be able to buy cigarettes, beer and candy but I do think if you do continue to buy those things, you should pay more. Maybe some people will stop because of the cost. And those that don’t will pay for their own health care. If this happens, maybe we won’t have to raise income taxes to pay for health care.
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