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AFL-CIO’s Arguments Against “Cadillac Tax” Typical Special Interest Nonsense

2 min readBy: Gerald Prante

I have to admit. Watching the in-fighting among Democrats on the issue of whether or not high-valued health insurance plans should be taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. ed to pay for health care reform is rather amusing.

Unions are in the rare position of opposing a tax increase, while the White House is now endorsing a tax plan that candidate Obama villified his opponent for supporting in the 2008 election (with the large financial support of the labor unions). The Obama/Biden attack on McCain’s proposal to tax health insurance benefits was a campaign of dishonesty from start to finish.

And now we sit here with the unions making the following argument: we accepted lower wages in exchange for greater health insurance benefits and now you are going to tax those benefits.

First off, the unions are acknowledging that they have long pushed to have a large fraction of their compensation be in non-tax form. They are just now upset that some of that currently-free compensation will be taxed. These are the same unions that will villify legal tax loopholes taken by high-income earners (and would support almost any retroactive tax increase on them as well…ask the AFL-CIO if it supports a retroactive increase in the estate taxAn estate tax is imposed on the net value of an individual’s taxable estate, after any exclusions or credits, at the time of death. The tax is paid by the estate itself before assets are distributed to heirs. for 2010 to pay for health care reform).

It’s also funny to hear unions acknowledging that they have accepted benefits in lieu of wages as a form of compensation. These are the same unions who have constantly cited statistics about how wages have been stagnant in recent years, conveniently ignoring the value of increased benefits that have taken place during that same time period.

The ideal solution would be for politicians to not listen to hypocritical special interests like the AFL-CIO and pursue a better health care reform bill that does indeed address the tax-exclusion for health insurance benefits via the income tax, among other things. But if the Democrats are going to pass health reform, an excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. on health insurance benefits is superior to a 5.4 percent surtaxA surtax is an additional tax levied on top of an already existing business or individual tax and can have a flat or progressive rate structure. Surtaxes are typically enacted to fund a specific program or initiative, whereas revenue from broader-based taxes, like the individual income tax, typically cover a multitude of programs and services. arbitrarily imposed on high-income people to pay for health reform that Democrats claim will benefit society as a whole.