Bill Introduced to Repeal Obamacare “Cadillac Tax”
April 11, 2014
Senate Finance Committee Member Pat Roberts (R-KS) has introduced a bill to repeal the excise tax on high-cost employer-sponsored health insurance plans.
Known as the “Cadillac Tax,” this Affordable Care Act provision levies a 40 percent marginal excise tax on high-cost employer sponsored health insurance plans starting in 2018. The purpose of this tax is reduce the generosity of employer sponsored healthcare plans by taxing benefits over a certain value.
Current law, which excludes employer-sponsored healthcare plans from taxation, encourages employers to compensate employees in generous healthcare plans over wages. This has been linked to over-utilization of healthcare due to the fact that individuals are less likely to face the true cost of their care and leads to higher healthcare costs overall.
Health benefits should be included in the tax base. There is no legitimate tax policy rationale to exclude them. However, the “Cadillac Tax” is a poor substitute for just eliminating the employer-provided healthcare exclusion. Eliminating this hole in the income tax would have at least given Congress additional revenue to lower rates for everyone.