Look for the Union Exemption

More on the possible union carve-out from the Senate’s excise tax on high-value health care plans. The Washington Post mentions the possibility in its story today about President Obama’s meeting with Congressional leaders.

Obama last week endorsed one of the Senate’s most contentious revenue-raising provisions: a 40 percent excise tax on high-cost insurance policies that is deeply unpopular among labor unions and many House members.

A small group of labor leaders met separately with administration officials on Wednesday to try to find ways to lessen the impact of the tax on union members. Meanwhile, House leaders have signaled that they might be willing to accept the tax on high-cost insurance plans — set by the Senate at $23,000 for family coverage — if the threshold were raised to about $25,000. The lost revenue would be replaced by some version of a tax on the wealthy, which the House prefers.

So we go back to the House’s supposed “millionaire tax,” which is misrepresentation as marketing. Veronique de Rugy in the latest Reason magazine compares the tax to the horrible AMT and points to the far-reaching, jobs-killing effect of tax.

[Many people classified as millionaires aren’t millionaires at all. Out of the 300,000 or so joint tax filers earning more than $1 million, about 90 percent have small business income. That’s because 75 percent of America’s small businesses are structured as pass-through entities and pay their business taxes at the individual level. So the $1 million isn’t going into those individuals’ pockets; it’s money they use to run their businesses. To avoid the new tax, those businesses would have to adopt a new structure and start paying the complicated corporate income tax.

As income taxes increase on very productive people and small businesses, they will be less willing to hire or keep employees.

This “compromise” thus brings us the worst of both worlds in taxation.

We appreciated the high-quality snark on the issue from The Daily Caller:

Unions could be exempt from insurance-plan tax, bad weather, reality — According to the AP, Obama met with union leaders on Monday and discussed the possibility of “exempting or delaying health plans covered by collective bargaining agreements from being subject to” a tax on high-cost insurance plans. But private unions aren’t the only ones–unionized government employees with “Cadillac plans” could also be exempt. Looking at it all, one wonders how, exactly, we’ll pay for the new healthcare bill: Union plans are off limits, so is an increased income tax on high-income earners, and massive subsidies for individual plans seems like something everyone with a Rayburn building mailing address can agree on, if only to stave off being tarred and feathered by their constituents. Who said that unions are a thing of 21st century? Really, who said that?

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