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The longstanding battle over the Cadillac health insurance tax entered a pause, after the Senate left for its summer recess without acting on the bill that the House passed by a 419-6 vote on July 19. As I previously explained, that bill would repeal the Cadillac tax before it takes effect in 2022, depriving the country of a powerful tool to control health care costs.
Unfortunately, the momentum for Cadillac tax repeal remains strong. A Senate bill to repeal the tax has drawn 62 sponsors. Senate Majority Whip John Thune (R-South Dakota) recently suggested that the Senate move this fall to repeal the Cadillac tax in conjunction with the extension of expired tax provisions.
Of course, there has been no change in the economic case for letting the Cadillac tax take effect. The tax would provide an effective, though imperfect, offset to the unwarranted income and payroll tax break enjoyed by high-end employer-provided health insurance plans.
On July 29, nearly 100 economists and other policy experts, spanning the political spectrum, came together to oppose Cadillac tax repeal. In a letter to Senate majority leader Mitch McConnell (R-Kentucky) and Senate minority leader Chuck Schumer (D-New York), they urged “Congress to take no action to weaken, delay, or reduce the Cadillac tax until and unless it enacts an alternative tax change that would more effectively curtail cost growth.” In addition to eight scholars in residence at AEI (myself among them) and scholars at other conservative organizations, the signatories included scholars at the Brookings Institution, the Urban Institute, and the Center on Budget and Policy Priorities. Scholars at numerous universities, including Harvard, Princeton, Stanford, MIT, Dartmouth, and the University of Pennsylvania, also signed. As the letter notes, the signatories hold a variety of views on other provisions of the Affordable Care Act.
The letter also highlighted the fiscal impact of the House-passed repeal bill, noting that it “would add directly to the federal budget deficit, an estimated $197 billion over the next decade according to the Joint Committee on Taxation.” The fiscal harms would grow over time. The Urban-Brookings Tax Policy Center estimates that the bill would add a staggering $947 billion to the deficit during its second decade.
By voting to repeal the Cadillac tax last month, the House chose to increase health care costs and widen the fiscal imbalance. The Senate will soon decide whether to follow suit.
By voting to repeal the Cadillac tax last month, the House chose to increase health care costs and widen the fiscal imbalance. The Senate will soon decide whether to follow suit.
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