MBGH Members Only Peer Roundtable Discussions: Strategies Being Implemented re: Cadillac Tax
The next time your CFO asks you to explain the Cadillac Tax just tell them it is a way to "equalize the way wages and health insurance are taxed. "
According to the April 13, 2015 article in Employee Benefit News, Jonathan Gruber, an MIT economist, explains "Health insurance is compensation and wages are compensation. They should be taxed the same. And they're not". Gruber believes that since health insurance benefits aren't taxed, the system encourages excessive consumption.
The Cadillac Tax, which goes into effect in 2018, is a 40% excise tax on health coverage that costs more than $10,200 for an individual or $27,500 for a family. It is estimated that about 1/3 of all employers will be subject to the tax if they don't make changes by 2018.
Michael Cannon, director of health policy studies at the Cato Institute, believes that because so many employers will be impacted, there will be political pressure to repeal it. However, such a move may result in all of the ACA being re-opened for reconsideration and repeal of other reforms.
Democrats are likely to be pressured more than Republicans since Republicans say "we hate taxes, we hate the ACA, we want to get rid of this tax". Additionally, union plans and unions will be heavily impacted by the tax and will pressure for its repeal as well, putting more stress on the Democrats.
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