Talk to any inside-the-Beltway political consultant, and you’ll learn that populism is totally hot right now. They’re not wrong.
Polls consistently show that the public has felt the pinch of the economic contraction for going on over six years, and they are getting rather fed up with the fact that too few seem to be feeling their pain. Surveys suggest that the public does believe corporations pay enough in taxes, despite the United States having one of the highest corporate tax burdens in the industrialized world. Moreover, the voting public doesn’t think wealthy individuals pay enough in federal taxes. Surely, some believe that rates are too low while others lament the ability of the rich to evade paying the taxes associated with their brackets due to the fact that they can afford to patronize financial consultants. Whatever the reason, the redistribution of incomes is a popular concept today.
But just because something is politically popular doesn’t make it good policy. One of the most popular examples of a punishing and redistributionist tax is that dubbed the “Cadillac Tax,” a levy imposed on high-value health insurance plans as part of the Affordable Care Act.
“The attraction of the tax is that it raises money to pay for health reform — about $150 billion from 2013 to 2019 — while simultaneously making health reform less costly, by reducing the over-consumption of health care. Union leaders strenuously oppose even this change,” The Washington Post editorial board gushed in 2010. The massive 40 percent tax would apply to individuals who receive $10,200 in individual coverage or families who pay for $27,500 in insurance.
But if this tax was popular, it was also such an onerous burden on health insurance consumers that its implementation was delayed until well after Obama leaves office. Some allege that this particular tax was just another element of Obamacare that was misrepresented in the health care reform pitch to the public.
“The Cadillac tax makes sure that more health insurance dollars are spent across a greater number of people. It was probably a bad idea even before the news broke that a once famous and now nearly infamous adviser [Jon Gruber] had a big hand in it,” Forbes contributor Robert Wood wrote in November of last year. “And it seems almost dastardly now, a real bait and switch.”
And now some Democrats are apparently giving up on ever implementing this tax at all. “A group of House Democrats are pushing to repeal ObamaCare’s so-called ‘Cadillac tax,’ which they say unfairly targets people in more expensive areas like the Northeast and West Coast,’ The Hill reported.
Reps. Joe Courtney (D-Conn.), Donald Norcross (D-N.J.) and Dina Titus (D-Nev.) will unveil legislation Tuesday to eliminate the tax on the country’s most expensive insurance plans.
The tax, which goes into effect in 2018, is based on the cost of premiums, which the lawmakers point out are higher in areas with more expensive health costs.
“The excise tax is an unnecessary change that would adversely impact beneficiaries in high-cost areas,” Courtney’s office said in a release Monday to announce the bill, called the Middle Class Health Benefits Tax Repeal Act.
The president and the Democratic Party’s progressive elements will defend this tax, but it’s likely to be far more popular on the stump than it is effective in practice. But Republicans will have a powerful rhetorical tool available to them if a Democrat-sponsored repeal bill passes both chambers. In the GOP’s quest to deal health care reform a death by one thousand cuts, it would be ideal to have Democrats deliver at least one blow against the tyrant Obamacare.