Legislation

House votes 419-6 to ax ‘Cadillac tax’ in health care law

The House voted overwhelmingly to repeal a tax Wednesday intended to fund the Patient Protection and Affordable Care Act, preserving tax breaks for employer-sponsored insurance plans favored by large corporations.

In a reversal of the usual partisan roles, Democrats rather than Republicans led the charge to kill a key part of the health care law.

The bill to repeal the levy commonly known as the “Cadillac tax” passed 419-6 with bipartisan support. All four members of Arkansas’ delegation voted for the measure.

The 40% excise tax on the most generous and expensive employer health-insurance plans was included in the health care law as a measure that economists said would help curb health costs.

Congress kept delaying its implementation, so the tax has never actually been collected. Had it gone into effect, it would have hit about 1 in 5 employers that offer health benefits to their workers, according to estimates from the Kaiser Family Foundation.

The vote to repeal the tax highlights the conflicting forces pulling at Democrats when campaigning versus legislating.

Several of the party’s presidential candidates led by Sens. Bernie Sanders and Elizabeth Warren support replacing nearly all private insurance with a government-run system financed by tax increases. Former Vice President Joe Biden has a less sweeping plan to bolster the Affordable Care Act, but it still would offer a public health insurance option funded by tax increases on the wealthy.

But in Congress, Democrats and Republicans are facing pressure from labor unions and large companies to move in the opposite direction by keeping tax advantages for employer-sponsored plans. Supporters of repealing the tax say keeping it in place would force employers to offer less generous health insurance to their workers.

Employers can reap large tax savings by compensating their employees in the form of more extensive health insurance, rather than wages, which are subject to payroll taxes. Employer-paid premiums are exempt from federal income and payroll taxes, and the premiums employees pay are also often excluded from taxable income.

The dissonance among Democrats about whether to expand or shrink employer-sponsored health coverage makes them look like “gymnasts,” said Rep. Mike Kelly, a Pennsylvania Republican.

“Where are you on this stuff?” he said. “Wait a minute, you’re all advocating that there be no such thing as employer-sponsored coverage.”

The repeated delays in imposing the tax mean that Congress was never able to test whether it would curb the explosion of health care spending, which has risen an average 4.2% every quarter between 2010 and 2018, according to data from the Kaiser Family Foundation.

The repeal also would mean that the Treasury Department won’t collect the $201 billion the Joint Committee on Taxation estimated it would raise over a decade.

The health care law included several other tax increases, including a 3.8% tax on investment income and a 0.9% levy on wages for top-earners. The portion of the law that was supposed to be financed through the Cadillac tax instead would be paid for through deficit spending, unless lawmakers propose a last-minute tax increase to offset the cost.

Democrats have generally opposed measures to chip away at President Barack Obama’s health care law, but the Cadillac tax has been unpopular since it became part of the code.

The measure to repeal the tax was passed under a fast-track procedure requiring two-thirds support among House members.

Not all Democrats are on board with eliminating the tax. Rep. Ron Kind, a Wisconsin Democrat, said he opposes the repeal because the cost isn’t offset and there wasn’t any discussion about how scuttling the tax would affect the Affordable Care Act overall.

“I think we are lapsing into some very bad habits in the majority,” he said. “We need to start instilling some fiscal discipline in this place and making some tough decisions.”

Senate Majority Leader Mitch McConnell, a Kentucky Republican, hasn’t committed to addressing the issue in his chamber. Because the repeal effort is led by Democrats, it sets up a path for McConnell to use it as a vehicle to attach Republican tax priorities.

“We’ve kicked the can down the road for so long on this one that the assumption is that it’s never going to go into effect,” said Rep. Dan Kildee, D-Mich. “There’s a certain inevitability to this one getting repealed.”

Information for this article was contributed by Emily Wilkins of Bloomberg News.

A Section on 07/18/2019


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