Find a more eq­ui­table so­lu­tion than im­pos­ing ‘Cadil­lac tax’

Modern Healthcare - - COMMENT -

Re­gard­ing the re­cent ed­i­to­rial “Keep the Cadil­lac tax” (Oct. 12, p. 26), the so-called Cadil­lac tax, un­for­tu­nately, gets caught in the cross-cur­rents of three eco­nomic con­cerns, not all com­pat­i­ble with each other. As the ed­i­to­rial notes, there is the need to main­tain eco­nomic in­cen­tives that avoid what ac­tu­ar­ies call “in­duced con­sump­tion,” or health­care con­sumers be­ing in­su­lated against the true costs of care and thereby be­ing less fru­gal in their con­sump­tion of health­care ser­vices.

The other cur­rent is the need to main­tain the fund­ing of $91 bil­lion de­rived from this tax to pay for health in­sur­ance sub­si­dies for those newly in­sured un­der the Af­ford­able Care Act. This is re­ally a re­dis­tri­bu­tion of in­come through tax­a­tion and de­ductibil­ity, which is the third eco­nomic cur­rent.

The re­dis­tri­bu­tion of in­come achieved by this tax mech­a­nism, how­ever, largely comes at the ex­pense of mid­dle-in­come tax­pay­ers at a time when real in­comes have de­clined in their pur­chas­ing power over the past 20 years or more. The trou­bling part of this equa­tion is that many of the peo­ple whose health in­sur­ance ben­e­fits will be sub­ject to the Cadil­lac tax made a longterm pact in­volv­ing the trade-offs in wages and health­care ben­e­fits. I am speak­ing about union work­ers and many pub­lic-sec­tor em­ploy­ees.

I fa­vor a pol­icy that aims more to­ward in­come equal­ity, but I think other meth­ods would be more eq­ui­table than im­pos­ing the re­dis­tri­bu­tion against the same mid­dlein­come peo­ple. In­stead, fund the $91 bil­lion from those whom War­ren Buf­fett iden­ti­fied as de­serv­ing to pay higher taxes.

Kevin Mowll Ex­ec­u­tive di­rec­tor Re­source Ini­tia­tive & So­ci­ety for Ed­u­ca­tion (RISE) Santa Cruz, Calif.

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