‘Cadillac Tax’ Could Help Rein in Health Costs

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Some lawmakers and presidential candidates have recently targeted the so-called Cadillac tax, a key provision in the Affordable Care Act (ACA) that was designed to help restrain health care costs.

It would do so, starting in 2018, by limiting the tax-free treatment of employer-provided health insurance. Only the most generous insurance plans are projected to be initially hit but more will gradually become subject to it.

Defending the tax in a new blog post, Concord Coalition Policy Director Josh Gordon explains that the current tax exclusion “is very expensive for the government, only provides benefits to some workers, distributes those benefits primarily to those who earn the highest incomes, and encourages higher health care spending.”

When the ACA was created, Gordon writes, “the Caddy tax worked politically because it sounded more like a tax on insurance companies rather than a limit on workers’ fringe benefits.” In addition, the Congressional Budget Office said it would help reduce deficits and hold down health care costs.

For critics to credibly argue against the tax, he says, “they need to not just say they will pay for repeal’s effect on increasing the deficit, they should propose something that reduces the growth in health care costs over the long term.”

External links:
Letter From 101 Economists Supporting the Tax
Why Economists, But Few Others, Love Cadillac Tax (N.Y. Times)
Why Dump the Cadillac Tax? (TaxVox)

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