RSS Feed MenuCQ yesterday:
Unions tentatively struck a deal Tuesday to exempt collectively bargained healthcare plans from a tax on high-cost plans expected to be used to help raise revenue for the healthcare overhaul.
AFL-CIO President Richard Trumka, Service Employees International Union President Andy Stern and United Auto Workers President Ron Gettelfinger met with House Speaker Pelosi Tuesday, a day after labor leaders met at the White House to express their opposition to the excise tax.
House and Senate Democratic leaders are to meet with President Obama this morning at the White House to discuss health care. House Ways and Means Chairman Charles Rangel said he hopes there could be an agreement on the excise tax as early as today after the White House meeting, but then conceded: “That’s stretching the word `hope.’ “
Exempting collectively bargained plans would appease unions that often offer expensive health plans in lieu of higher wages. The deal could also help Obama avoid breaking his promise not to tax those earning less than $200,000. Obama recently expressed a preference for the excise tax.
The excise tax could further be tweaked to ensure Obama’s promise is kept for non-union workers as well.
This continues the evolution of the Obama plan: ever more entitlement expansion, ever less reform and cost control. The tax on so-called “Cadillac plans” was not just a revenue raiser. It was intended to end one of the most dangerous perverse incentives in the US health system: wages are taxed, but health benefits are not, incentivizing everybody to take compensation as much as possible in the form of benefits. That incentive will now be perpetuated, at least for union employees – precisely the group for whom the incentive did the most damage.
As things are going, by the time Obama and the congressional Democrats are finished, we’ll have expanded the present system without reforming it. Bill Clinton’s White House deployed the phrase: “Mend it, don’t end it.” Obama’s motto seems to be: Why fix it when you can inflate it?
sinz54 // Jan 14, 2010 at 12:12 pm
Look on the bright side:
This gives the Republicans a chance to campaign on raising this tax, at least, to help balance the Federal budget.
No Republican is going to oppose taxing the benefits of labor unions.
And this could mark the first move away from the “all taxes are bad” faux libertarianism of the GOP.
balconesfault // Jan 14, 2010 at 12:22 pm
That incentive will now be perpetuated, at least for union employees – precisely the group for whom the incentive did the most damage.
I really don’t get this. How did the incentive damage union workers?
IMO, it is tacitly unfair to have such a policy be implemented in the middle of a collectively bargained agreement. Clearly workers gave up some amount of wages in return for benefits, and suddenly taxing those benefits changes the algebra that went into the wage-benefit package, and reduces the value of the contract to the workers.
I do think that long term the incentive is bad public policy – and a smarter compromise, imo, would be to grandfather existing collectively bargained agreements, but allow the incentive to lapse for future agreements.
This is the kind of thing that Republicans could actually bring to the table, if their presence at the table would suggest that some number of Republicans would actually vote for the final product. But of course by now everyone knows that will not happen, and so Republicans have no voice.
Kanzeon // Jan 14, 2010 at 3:18 pm
balconesfault:
“I really don’t get this. How did the incentive damage union workers?”
Obviously, it’s the reason that union worker make so much less in wages and benefits than nonunion workers.
Brand New Cadillac Will Get The Excise Tax « Around The Sphere // Jan 14, 2010 at 5:11 pm
[...] David Frum at FrumForum: This continues the evolution of the Obama plan: ever more entitlement expansion, ever less reform and cost control. The tax on so-called “Cadillac plans” was not just a revenue raiser. It was intended to end one of the most dangerous perverse incentives in the US health system: wages are taxed, but health benefits are not, incentivizing everybody to take compensation as much as possible in the form of benefits. That incentive will now be perpetuated, at least for union employees – precisely the group for whom the incentive did the most damage. [...]
mickster99 // Jan 15, 2010 at 3:27 am
More entitlements. Yesssssssssss!!!!!! In 3 months I qualify for Medicare. What a relief. I have paying $15000 a year for COBRA coverage from my previous employer. Ok the premium for Part B is a $110 per month. Yeahhhhhh!!!! I have been paying into it biweekly since I was Medicare came into being. Single payer would provide the most cost savings but blue dogs and red staters said no. No reform, again blue dogs and red staters. Or conservative types. Please more entitlements! Fix the Drug Benefit passed by the red staters. The donut hole. Democrats need a 70 vote majority in the Senate then will get this country back on its feet. Conservative is dead!!!!!