‘Cadillac tax’ runs over the middle class

Printed from: https://newbostonpost.com/2015/12/05/cadillac-tax-runs-over-the-middle-class/

Have you heard of the “Cadillac tax?”

Despite the clever phrasing, it’s not a luxury automobile tax aimed at the wealthiest 1 percent. The Cadillac brand has long been associated with affluence. In the 1950s and 1960s, owning a Cadillac signaled that a person had climbed to the top of the American socio-economic ladder. Following the fuel shortages and recession of the 1970s, the same Cadillac suggested excessive gas guzzling and unseemly conspicuous consumption.

So, on the face of it, a Cadillac tax presumably targets those rich people who are addicted to over-the-top consumerism. At least that’s what some PR flacks must have thought when latching onto the phrase.

But contrary to what one might think, the Cadillac tax barely disturbs the infamous top 1 percent. That’s because the Cadillac tax is not a tax on yachts or other luxury items, as one might expect.

The Cadillac tax is actually a tax, soon to be implemented under the Affordable Care Act (aka Obamacare), on health insurance plans that the government deems “too generous.” It is a tax on those working Americans, including countless dues-paying union members, who successfully negotiated strong family health insurance benefits at the expense of short-term wage increases.

In general, the Cadillac tax will impose a 40 percent excise tax penalty on families with health insurance plans valued at $27,500 and single persons with plans valued above $10,200 annually.

Why would Congress have agreed to such a scheme? It is, of course, possible that some members of Congress did not know they were agreeing to this tax; that perhaps, like then-Speaker Nancy Pelosi, they simply “passed the bill in order to find out what’s in it.” Only now are people beginning to realize that they were sold a bill of goods; that the law hammers middle class workers in order to cover the uninsured.

Paradoxically, the same Administration that claims to have improved American health care by extending benefits to more people, is responsible for increasing the cost and lowering the quality of coverage for those workers who already have effective health insurance. But, no matter. President Obama will be long gone when the tax finally goes into effect.

You see, the president purposely delayed the implementation of this part of Obamacare so that he will not suffer the political consequences when the tax kicks in.

But beginning in 2018, the new president will be forced to order the Internal Revenue Service to tax health insurance plans that the government classifies as too generous. Applying a convoluted Rube Goldberg-inspired formula, Obamacare will send workers scurrying to H& R Block offices to calculate whether the Cadillac tax will pinch their hard-earned, job-related benefits.

As with any sneaky hidden tax, the goal is to obfuscate through indirection. In the strict text of law, the assessment falls upon insurance companies, who will assuredly pass the cost onto businesses that provide health insurance to employees. As a result, workers will face a dispiriting choice between lower wages or slimmed-down health insurance benefits.

At this moment, only a minority of insurance plans reach the tax penalty level. But at the rate Obamacare is driving up health insurance premiums, it won’t take long for many more working families to fall into this revenue trap. With companies like United Healthcare already planning to bail out of Obamacare due to financial losses, how high will other insurance companies hike rates in order to subsidize their Obamacare liabilities? In the end, middle-class families will get socked with costly premiums, higher deductibles, and multiplying co-pays.

There’s still a chance that the Caddy tax could be repealed before it goes into effect. Some in Congress, including New Hampshire Republican Congressman Frank Guinta, are pushing for Obamacare changes in an end of the year tax package. Still, President Obama continues to favor the Cadillac tax, and he may veto any bill that includes its repeal.  That would give him another opportunity to reprise class warfare rhetoric, bashing Republicans for “favoring the rich.”

Making their argument for the Cadillac tax, Obamacare advocates fret that its repeal will “cost” the government nearly $100 billion in revenue over a decade. That’s an odd and tendentious phrase: “cost the government.” It implies that personal wages and work-related benefits belong to the federal government, rather than to working men and women. In reality, tax relief can never “cost” the government anything. To paraphrase both President Obama and Senator Elizabeth Warren, the federal government didn’t earn that.

Currently, approximately 175 million Americans are enrolled in health insurance plans through a family member’s workplace. For those families who did not lose their plans in the first round of implementing Obamacare, the new reality is: “If you like your plan, you can keep your plan — if you can afford it.”

Joseph Tortelli is a freelance writer. Read his other columns here