President Obama's new-and-improved Cadillac Tax isn't good enough, say those who worked to kill the previous incarnation of the controversial policy.
Unveiled as part of his proposed 2017 budget, the new version of the tax would take into account regional differences in the cost of health insurance to determine the threshold at which an insurance plan would be subject to a 40 percent excise tax.
Originally included in the Patient Protection and Affordable Care Act as a way to slow the growth of health costs by discouraging businesses from using generous health insurance policies, rather than wages, to compensate employees, the Cadillac Tax was decried by businesses that feared the loss of a major tax evasion strategy and unions that feared the loss of generous benefits that they have negotiated for their members.
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A two-year suspension of the Cadillac Tax was included in an end-of-the-year spending bill that passed in December with bipartisan support. Instead of going into effect in 2018, it will go into effect in 2020, assuming it is not suspended again, although many assume it will be.
"The 'Cadillac tax' cannot be fixed," said James Klein, president of the American Benefits Council, a nonprofit representing employers, reports Bloomberg. "We're glad the administration recognizes the 'Cadillac tax' is seriously flawed. But its impact in high cost areas is just one of its many problems."
The American Federation of State, County and Municipal Employees (AFSCME), which represents over 3 million public sector workers, also indicated to Bloomberg that anything short of full repeal of the Cadillac Tax was a non-starter.
Although supported by many economists across the political spectrum, the Cadillac Tax proved too politically toxic for officeholders in either party to strongly support. Although Jeb Bush's proposed health care plan includes a similar policy aimed at subjecting health benefits above a certain level to the same taxes as wages, most Republicans denounced the tax and both Hillary Clinton and Bernie Sanders have called for its repeal.
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