NEW REPORT: SO-CALLED “CADILLAC” Tax Would ACTUALLY IMPACt 40% of Health Care Plans
FOR IMMEDIATE RELEASE: October 13, 2009
Contact: Tim Bradley (BerlinRosen Public Affairs), 314-440-9936
NEW REPORT: SO-CALLED “CADILLAC” Tax Would ACTUALLY IMPACt 40% of Health Care Plans
JCT data shows Senate Finance Committee excise tax would have similar impact as health-care tax McCain proposed in presidential campaign
Also: Data shows tax would impact middle class far more than millionaires and discriminate against union workers, older workers, those in hazardous jobs
WASHINGTON, D.C. — The so-called “Cadillac” tax (also known as an excise tax) on health care plans proposed by the Senate Finance Committee would actually slam 40 percent of health care plans and disproportionately hit middle-class workers, older workers, and those in hazardous jobs, a new report released today reveals. Moreover, there would be about a $7,800 average tax increase between 2013 and 2019 to households affected by the tax — and middle income households making $50,000 to $75,000 affected by the tax would see their taxes increase 2% while millionaires affected would see their tax increase just 0.1%, according to the report.
The report released by the Communications Workers of America (CWA) compiles data from the Joint Committee on Taxation (JCT) and an analysis by Citizens for Tax Justice (CTJ).
“This is not a tax on ‘Cadillac’ plans; it is a middle class tax,” CWA President Larry Cohen said today. “It hits 40 percent of all health plans and will lead to even more cost shifting to workers. Rather than make those employers who already pay toward their workers’ health coverage pay more, let’s make employers who don’t pay, pay.”
Legislation voted on today by the Senate Finance Committee would raise $200 billion by imposing a 40 percent excise tax on insurance company health plans and self-insured plans offered by companies to their workers. The excise tax would be assessed on the value of health care plans exceeding $21,000 for a family and $8,000 for an individual starting in 2013. The “threshold” levels are higher for pre-Medicare retiree plans and high-risk industry plans such as in construction and mining – $26,000 and $9,850, respectively.
Contrary to claims by excise tax proponents that it will affect only “Cadillac” health plans, the tax is projected to affect up to 40 percent of health care plans by 2019 – just six years after it takes effect – according to a preliminary analysis by the JCT.
According to the JCT’s analysis, the effects include:
· 25 percent of family plans and 26 percent of single plans will be affected in 2015 — two years after the tax begins. By 2019, 37% of family plans and 41 percent of single plans will be affected.
· 24 million households will be affected in 2015, growing to 39 million households in 2019. One-third of middle class households making $50,000 to $100,000 will be affected by 2019.
· $1,005 will be the average tax increase paid in 2015 by all households affected. The tax will grow to $1,344 by 2019. Extrapolating from the JCT data, CWA estimates that the total average tax paid by a household affected by the tax would be $7,777 between 2013 and 2019.
· The tax is very regressive. For example, among households affected by the tax in 2019 a family making $1 million a year will pay twice as much as a family making $50,000 to $75,000 ($2,300 vs. $1,250), but the wealthy family’s income will be 14 to 20 times greater.
· An analysis of the JCT data by Citizens for Tax Justice found that households affected by the excise tax making at least $1 million would see a 0.1 percent tax increase, whereas those affected households making $50,000 to $75,000 would see their taxes increase 2 percent.
Middle class families will be affected significantly by employers demanding deep health benefits cuts to avoid paying the tax or shifting the cost of coverage to working families or, as projected by JCT and the Congressional Budget office (CBO), by employers cutting benefits to get below the threshold but subsequently increasing workers’ wages so that workers will pay increased income and payroll taxes. This is precisely the kind of tax on health care benefits – taxing workers’ health benefits as income – proposed by Sen. John McCain during the 2008 presidential campaign for which he was lambasted by candidate Barack Obama and most other Democratic officials.
Rather than impose a new tax on the middle class, CWA supports other revenue sources:
· Require most employers to provide coverage or pay an 8 percent penalty if they do not, as proposed under H.R. 3200 in the House of Representatives. This would raise $163 billion over ten years, according to CBO.
· Levy a modest surtax on the wealthiest Americans – 1.2 percent of U.S. taxpayers – as proposed in H.R. 3200, raising $544 billion over ten years according to JCT.
· Limit the charitable deductions for individuals earning more than $250,000 and families earning more than $500,000, as proposed by President Obama, which would raise $318 billion over ten years.
“It is simply wrong to make those employers who already are paying, pay even more by hitting them with a 40 percent excise tax, while not requiring anything from employers who don’t provide health care to employees,” Cohen added. “The way to end our recession is to improve, not cut, the wages and benefits of middle income families.”
The JCT analysis is based on the original “chairman’s mark” proposed by Finance Committee Chairman Max Baucus in late September. While the measure was subsequently altered during committee markup, the revenue raised declined modestly – from $215 billion to $201 billion between 2010 and 2019 – which should have a limited effect on the JCT’s original estimates of the number of plans, households and income groups affected by the excise tax.
To read the entire CWA study released today, please contact CWA for PDF (please open using Adobe Acrobat).
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Tim Bradley
BerlinRosen Public Affairs
15 Maiden Lane, Suite 803
New York, NY 10038
Cell: 314.440.9936
Frank Clemente
Communications Workers of America
202-434-1166
202-441-9818 (M)
501 Third Street NW, 8th Floor
Washington, D.C. 20001