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Taxing Employer Health Benefits: The Poison Pill That Would Kill Health Care Reform

Congress is finally beginning to grapple with a way to give all U.S. citizens access to affordable health insurance. Unions support universal coverage like a large majority of Americans.

Almost 15 years have gone by since lawmakers considered comprehensive reform to our nation’s health care system with the goal of making sure every American can access health care. How to pay for health care reform was the problem then — and it’s the problem now.

Sen. Max Baucus (D-Mont.), the powerful chairman of the Finance Committee, is suggesting an enormous new tax on employer-sponsored health insurance.

Such a tax would raise hundreds of billions of dollars. That tax revenue would help pay for a public government-sponsored plan for individuals and families.

For those who have employer-provided coverage, creating a “public” plan is a sensible way to make health insurance available to people who can’t get it through their employer and don’t qualify for Medicaid or Medicare. But a tax hike on health benefits to pay for health care reform is a bitter, bitter pill for middle-class wage-earners to swallow.

Most Americans find the prospect of such a tax downright obnoxious. Fortunately, Members of Congress are aware of the public’s hostility to taxing employer-based insurance. A recent national survey by Lake Research Partners shows 80 percent of likely voters oppose taxing health benefits.

Sen. John McCain (R-Ariz.) made the mistake of floating the idea during his presidential campaign. Candidate Barack Obama lashed out with a television commercial calling it “the largest middle-class tax increase in history.” Obama’s opposition to taxing employer-based health insurance was a big reason the Teamsters supported him for president.

For all those reasons, it seems extremely unlikely that a tax on employer-sponsored health insurance will ever become a reality. Or, let us hope.

If it did, it would destroy employer-sponsored health insurance.

Adding a tax onto an already crushing expense for employers and employees would create a huge disincentive to buy employer-sponsored health insurance.

It would mostly burden people who are older or sicker, women of childbearing age, employees of small businesses and residents of high-cost communities.

It would set off a stampede to the public plan. And the public plan would lose a major source of revenue.

There is no reason that revenue to pay for health care reform has to come out of the current health care system. Middle-class taxpayers just gave Wall Street the biggest bailout in history. Wall Street can well afford to return the favor.

We know Members of Congress can be creative when they need to find revenue offsets. Let them use that creativity just as they did for Wall Street to prevent another tax on those of us who live on Main Street.

Eliminating subsidies and preferences for the wealthiest Americans would go a long way to pay for the health care reform this country so desperately needs.

President Obama is suggesting a limit on itemized deductions for the 3 million wealthiest people in this country. That would raise about $270 billion over 10 years.

Another good suggestion is to extend the 2.9 percent Medicare tax, which applies only to wages, to ALL adjusted gross income, would raise $38.1 billion.

Imposing a 1.05 percent surtax on the Medicare tax on single people who earn more than $200,000, or couples that earn more than $250,000, would raise $7.2 billion.

Raising the capital gains tax to 28 percent — the rate under President Ronald Reagan — in top income brackets would raise $34.7 billion.

Limiting tax deductions for stock options and the write-off for intangible assets would add $15 billion to the federal Treasury.

Let’s make health care reform cover the uninsured but not penalize hard-working American families and individuals who have employer-sponsored plans. For those who claim this is class warfare, I’d say it’s been going on for quite a while and it’s time for that to change. Middle-class families — the backbone of this country — deserve better.

James P. Hoffa is the general president of the International Brotherhood of Teamsters.

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