The Cadillac Tax

Any scheme that creates a higher tax burden on already outrageously high health care costs is failure to begin with. But the Cadillac tax is especially egregious since it does exactly the opposite of what it is intended to do – rather than helping the poor and middle class, it gives them the short end of the stick."

Despite its Name, the Cadillac Tax Will Harm Poor and Ill South Carolinians Most

 

A massive blow to South Carolina’s families is being overlooked in the current national debate on repealing the Affordable Care Act: the impending implementation of the 40 percent Cadillac tax. 

Americans were told that the excise tax on health insurance plans exceeding a certain price was integral to making Obamacare work financially. In reality, the tax punishes 177 million Americans for the sin of having employer-sponsored health insurance.

The tax, which is scheduled to go into effect in 2020, will likely harm more than 2.2 million South Carolinians. Forty-six percent of the state’s residents face paying higher premiums for worse coverage, higher deductibles, and higher co-pays as a result of the Cadillac tax.

While the tax may’ve originally been targeted at rich people, the rising cost of health insurance plans as a result of Obamacare means almost all employer-sponsored and union-provided health coverage will soon be subject to the 40 percent tax. This will hurt lower- and middle-class Americans workers the most.

According to Mercer’s National Survey of Employer Sponsored Health Plans, families earning between $20,000 and 30,000 could see their tax liability increase by an average of 23 percent as a result of a “cap on the exclusion,” a policy under Congressional consideration that functions like the Cadillac tax, that treats health benefits like income and taxes it above a set threshold. Americans earning between $30,000-60,000 per year will see an 18 percent average hike in their tax liabilities. Families at the upper end of the income brackets earning over $220,000 a year, by comparison, will see an increase of just 5 percent.  Clearly the tax hits America’s poorest the hardest.

Any scheme that creates a higher tax burden on already outrageously high health care costs is failure to begin with. But the Cadillac tax is especially egregious since it does exactly the opposite of what it is intended to do – rather than helping the poor and middle class, it gives them the short end of the stick.

According to the Centers for Disease Control, roughly half of all adults suffer from one or more chronic ailments such as heart disease, diabetes, and cancer. These Americans rely on groups of specialists to manage their health conditions through coordination of care. Physicians work to lessen the impact of their patient’s symptoms in the most cost-effective, minimally invasive way.

Since many businesses and union will try to avoid paying the steep Cadillac tax by dramatically reducing health insurance benefits through narrower networks, the tax will unduly burden roughly 117 million chronically ill adults through reducing access to appropriate care plans. It will also dramatically increase out-of-pocket costs, thanks to higher deductibles. 

These effects will be particularly harmful to the 10.9 percent of South Carolinians living with a disability. 

The Cadillac tax is a loser on every level. Not only is the tax particularly damaging to ill and low-income Americans, it is also extremely unpopular across the political spectrum. Public Opinion Strategies found that 79 percent of Republicans and 56 percent of Democrats oppose the tax. So a vote to kill the damaging and unpopular tax isn’t just good sense, it’s also good politics.

Employers offer valuable and innovative programs to help control costs and keep their workers healthy—like on-site medical clinics, employee assistance and wellness programs. In order to avoid paying the tax, many employers may reduce coverage and raise premiums and deductibles, or they may eventually drop health insurance altogether. As a result, fewer Americans will have health coverage, and those who do will have worse insurance and pay much more for it.

Simply put, the Cadillac tax is bad policy that belongs in the junkyard. Members of Congress must make sure the tax is taken off the books before it has a chance to harm millions of Americans.

 

(Ben Howe is a Senior Contributing Editor at RedState, a documentary filmmaker, and author of the upcoming book "The Immoral Majority." He lives in Tega Cay, SC.)

 

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