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Is Congress Exempting Itself From Health Insurance Tax?

Posted By Conn Carroll On January 25, 2010 @ 1:31 pm In Obamacare | Comments Disabled

[1]

It is still far from clear [2] what the White House’s new strategy to pass health care reform will be in the face of Scott Brown’s election to the Senate [3]. But according to Federal News Radio [4] negotiations between the House and Senate are still ongoing, including this victory for House Democrats:

Federal employees covered under some of the more expensive plans in the Federal Employees Heath Benefit Program now have some breathing room as well.

Federal workers had been left out of an earlier compromise on health care reform shielding union workers from a proposed 40-percent excise tax until 2018.

The office of Rep. Gerald Connolly (D-Va.) says he “personally called the White House to express his concern of leaving federal employees out of the deal.” An agreement reached Wednesday extends the exemption to federal employees through 2018 as well.

The Senate bill’s health insurance excise tax is terrible public policy. Although the insurance companies would technically make the tax payment (a 40% levy on insurance plans worth more than $8,000 a year for individuals) they would undoubtedly pass this cost along to employers purchasing the plans for their workers in the form of higher premiums [5]. Employers, in turn, would pass that cost on to their workers by lowering other forms of compensation like wages. Once the excise tax is passed on to workers, the result is no different than an increase in their income taxes. Faced with the possibility of paying substantially higher taxes, many workers would logically look for ways to avoid the tax. The first way they could avoid it would be by reducing the value of their health benefits below the threshold. If workers take less expensive health care coverage, they would want higher wages so as not to experience a reduction in total compensation. But this would not allow them to escape higher taxes completely, since higher wages would also be taxed.

Instead of facing this mess, Congress has reportedly chosen to exempt federal workers … which last time we checked included Members of Congress.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2010/01/25/is-congress-exempting-itself-from-health-insurance-tax/

URLs in this post:

[1] Image: http://www.foundry.org/wp-content/uploads/Pelosi-Reid-100126.jpg

[2] far from clear: http://www.foxnews.com/politics/2010/01/24/white-house-weighing-push-health-care-congress/

[3] Scott Brown’s election to the Senate: http://www.cbsnews.com/stories/2010/01/19/politics/main6117658.shtml

[4] Federal News Radio: http://www.federalnewsradio.com/?nid=35&sid=1869886

[5] they would undoubtedly pass this cost along to employers purchasing the plans for their workers in the form of higher premiums: http://www.heritage.org/Research/HealthCare/wm2654.cfm

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