‘Cadillac Tax’ Delay Would Be a Mistake

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The expensive tax breaks that lawmakers have been considering tend to get renewed annually. These so-called “tax extenders” would not be paid for, and the estimated 10-year price tag is over $700 billion.

Raising the fiscal stakes this year is that the developing deal is said to include a 2-year delay in the “Cadillac tax” on high-cost health insurance.

This would represent a huge bipartisan backtrack on fiscal responsibility. In the initial legislative debate over the Affordable Care Act, the inclusion of the Cadillac tax was the turning point that allowed the ACA to pass through the Senate. That was because the tax’s dual purpose of raising revenue and holding down health care costs led the Congressional Budget Office to suggest the ACA would reduce deficits over the long term.

A 2-year delay would cause businesses to halt current efforts to avoid the tax by reducing insurance and health care costs. Furthermore, if such delay were to become part of the annual tax-extender orgy of fiscal irresponsibility, there would be political momentum to continue the delay year after year.

Full repeal of the Cadillac tax would increase the 10-year deficit by just over $90 billion and by more than an estimated $500 billion in the following decade.

External links:
We Can’t Turn Back on Obamacare’s Turning Point (Concord)
Tax Extenders Deal Could Undermine the ACA (Real Clear Policy)
Democrats Attack a Pillar of Obamacare (Bloomberg View)

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