The Wall Street Journal is a serious newspaper, so I had to laugh when I read GOP Senators weigh taxing employer health-plans. Apparently Senators are thinking about including a new tax in their Obamacare repeal bill in order to raise revenue, improve equity, and reduce the distorted incentives that divert taxable wages into non-taxable healthcare expenses.
We learn from the article that although it’s a solid policy idea and is being considered by many Republicans, “it could be politically risky, since it could expand the impact of GOP health proposals from Medicaid recipients and those who buy insurance on their own to the roughly 177 million people who get coverage through their employers.”
Republicans accused Obamacare opponents of not having read the Affordable Care Act before approving it in 2010. Seven years later it appears Republicans themselves haven’t read the law that they are now trying to overturn. If they did they would discover that Obamacare already includes this provision, an excise tax on high cost employer plans, nicknamed the Cadillac tax.
It’s far from perfect, but it’s not so bad either. It places a steep tax on corporate health spending above a certain high level, thus limiting the impact to the most serious cases, discouraging healthcare inflation, and phasing the tax in gradually.
So rather than wasting time discussing a new approach where consensus will be hard to forge, all the GOP has to do is leave the Cadillac tax in place. While they’re at it they might consider leaving the rest of the Obamacare in place, too, and working to improve the few areas that need a tune-up.
But I read the whole article in the print edition without finding any mention of the Cadillac tax. Someone must have pointed that out to the editor, because the online version tacked on two sentences at the end about it.
As I argued back in February (Can Congress agree on the Cadillac tax?) limiting the tax deductibility of employer sponsored health insurance is a good idea, but is opposed by a huge array of forces on the left and the right. I advocated then and am suggesting now, to leave the Cadillac tax in place.