The budget deal released by Congress and set to be voted on by the House and Senate later this week repeals three Obamacare taxes – the health insurance tax, medical device tax and Cadillac tax.
Repeal of these taxes will result in hundreds of billions of dollars in tax reduction over the next decade and represents significant progress toward repealing all trillion dollars in Obamacare taxes.
Health Insurance Tax
Repeal of this tax is a win for the middle class, seniors, and small businesses that would have seen higher healthcare costs.
The tax is imposed on 11 million households that purchase through the individual insurance market and 23 million households covered through their jobs.
The tax is responsible for a 2.2 percent increase in premiums per year and by almost $6,000 over a next decade for a typical family of four with small or large group insurance. This tax is also highly regressive – half of the HIT is paid by those earning less than $50,000 a year.
The HIT also directly impacts approximately 1.7 million small businesses, and would have cost small businesses 286,000 jobs and $33 billion in lost sales by over a decade.
The 40 percent excise tax on employer-provided plans, known as the Cadillac tax, was passed into law under Obamacare but has never taken effect. If Congress had not acted, the tax would have gone into effect in 2022 on plans exceeding $10,200 for individuals and $27,500 for families.
The Cadillac tax is broadly unpopular with the American people – a 2018 poll had 81 percent of respondents in opposition to the tax.
In order to avoid the Cadillac tax threshold, employers would be forced to raise deductibles and copays in the plans they offer their employees.
According to research by the Kaiser Family Foundation, nearly half of all companies which offer health insurance to their employees would have faced the tax by 2030. This could have cost families with high quality insurance plans as much as $3,400 per year.
The left-leaning Tax Policy Center reported that, “70 percent of the revenue raised by the Cadillac tax will be through the indirect channel of higher income and payroll taxes, rather than through excise taxes collected from insurers.”
Medical Device Tax
Obamacare imposed a 2.3 percent excise tax on the sale of medical devices by manufacturers and small businesses. This tax covers common hospital equipment like X-Ray machines, MRI machines, and hospital beds.
The medical device tax was in effect from 2013 and 2015 but Congress has suspended the tax since 2016. When it was in effect, research indicates that the tax reduced research and development by $34 million in 2013 and disproportionately harmed companies with lower profit margins. This resulted in a loss of approximately 28,000 jobs.