Obama’s 40% ‘Cadillac Tax’ Repealed in Landslide Vote

Aside from the individual mandate that required all Americans to purchase health insurance or pay a fine, the most onerous provision of the Affordable Care Act, better known as Obamacare, was the so-called “Cadillac tax” on generous private health insurance policies.

The 40 percent tax on top-tier, so-called “Cadillac” private or employer-offered health insurance plans, such as those with extensive benefits and added perks not generally offered in a standard package, was intended to keep health care costs down by discouraging those expensive plans.

The tax was widely unpopular on a bipartisan basis from the start, and now the Democrat-controlled House of Representatives has overwhelming voted to repeal the tax, according to The Hill.

The measure passed the House by a margin of 419-6 and will now head to the Republican-controlled Senate.

The only ones still defending the Cadillac tax now are economists focused on health care, who continue to insist that the tax would help keep health care costs down by capping private health insurance policies. 

The economists point to an analysis from the Congressional Budget Office that claimed a repeal of the tax would cost the government roughly $196.9 billion over 10 years.

That claim is suspect. The Cadillac tax has never gone into effect; the government has not raised a single dollar of revenue from it. The implementation of the tax has been repeatedly delayed.

A CNN report in 2015 explained why the Cadillac tax was so unpopular on both sides of the political aisle.

Obamacare included the provision of the 40 percent tax on generous insurance policies with lots of benefits and perks. The problem is, many companies offer such insurance policies to attract and keep good workers, and many unions negotiated such insurance packages as benefits for members in lieu of higher wages.

Had the tax gone into effect, companies would have had to either reduce the value of policies offered to avoid the tax or raise prices on consumers in order to absorb the cost of the tax.

Businesses would inevitably have had to reduce or limit certain benefits offered in top-tier packages, and labor unions would have lost a significant bargaining chip for future negotiations with employers on behalf of workers.

Perhaps even more concerning for businesses and unions was the fact that the tax was intended to increase over time to catch even more plans in the taxable net as it was pegged to the standard inflation rate, and not just the rate of inflation in the health care sector.

Congress had voted more than once to delay the implementation of the tax, initially deferring it to 2018, then pushing it back once again to 2020.

Now the tax has been completely repealed and will never take effect.

Perhaps more than any other provision of Obamacare, the Cadillac tax revealed the true goal of the law that overhauled the nation’s health care system: wealth redistribution.

The tax overtly punished wealthy businesses and individuals that opted for expensive health insurance policies, with the anticipated revenue raised from the tax intended to be used to cover the health costs of those with sub-par policies or no coverage at all.

Thankfully, that onerous tax was never implemented, and if the Senate will join the House in the repeal, it never will be.