Improve, Don’t Repeal, ObamaCare’s Cadillac Tax

Congress has twice delayed the tax—originally set to take effect in 2018—and weakened it by allowing employers to deduct the levy itself from their profits. But repealing the Cadillac tax is a bad idea. Instead, Congress should modify it to encourage the use of health savings accounts.

The Cadillac tax was one of roughly 20 new or expanded taxes contained in the 2010 health law. Along with provisions to reduce Medicare spending, the taxes were meant to pay for ObamaCare’s expensive subsidies and Medicaid expansion. The Congressional Budget Office estimates the Cadillac tax would apply to health-insurance plans with premiums of more than $11,200 for individuals and $30,100 for families in 2022, when it is now scheduled to take effect. The Joint Committee on Taxation projects the tax to generate $197 billion in total revenue from 2022-29. But the true policy goal of the Cadillac tax is to address the tax code’s preference for lavish plans, since premiums—both the employer and worker share—aren’t subject to federal income or payroll taxes.”