Congress Should Act Now to Repeal Obamacare Taxes

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Posted by Tom Hebert on Monday, December 2nd, 2019, 5:30 PM PERMALINK

In the last month of 2019, lawmakers have a chance to repeal several Obamacare taxes. If Congress fails to act before the end of the year, these taxes will begin to go into effect, devastating millions of American families and small businesses. 

Congress has already taken one step towards achieving this goal. This summer, an overwhelming 419-6 bipartisan Congressional majority voted to repeal the “Cadillac tax,” a 40 percent excise tax on employer-provided healthcare plans. The bill repealing the tax had 367  cosponsors, including members of the far left like Reps. Pramila Jayapal (D-Wash.) and Ro Khanna (D-Calif.) and conservatives like Reps. Mark Meadows (R-N.C.) and Doug Collins (R-Ga.).

If Congress fails to ensure repeal, the tax will go into effect in 2022 on plans exceeding $10,200 for individuals and $27,500 for families.

If implemented, the Cadilllac tax threatens the affordability and quality of healthcare for milions of Americans. According to research by the Kaiser Family Foundation, nearly half of all companies which offer health insurance to their employees could face the tax by 2030. According to Cigna, the Cadillac Tax could cost families with high quality insurance plans as much as $3,400 per year.

In order to avoid the Cadillac tax threshold, employers would be forced to raise deductibles and copays in the plans they offer their employees. 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.”

The Cadillac tax is also broadly unpopular with the American people – a 2018 poll had 81 percent of respondents in opposition to the tax. 

This is not the only Obamacare tax that Congress must act on.

The Obamacare health insurance tax (HIT) will go into effect at the end of the year if lawmakers fail to act. Although the tax is on insurance premiums, it is passed onto the middle class, seniors, and small businesses in the form of higher healthcare costs. 

The HIT is estimated to negatively impact the 11 million households that purchase through the individual insurance market and 23 million households covered through their jobs. In 2020 alone, the HIT is projected to add an estimated $16 billion to the cost of coverage for families and Medicare Advantage seniors. 

If lawmakers fail to repeal this harmful tax, the HIT will increase premiums by 2.2 percent per year and by almost $6,000 over the 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 is also bad for small businesses. Because the tax only applies to fully-insured plans, large corporations and unions (which are universally self-insured) emerge unscathed. According to the American Action Forum, the tax will directly impact 1.7 million small businesses. One estimate, conducted by the National Federation for Independent Businesses, estimates the tax could cost up to between 146,000 and 262,000 jobs over a decade. 

Congress should also repeal the 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.

In the few short weeks left of 2019, lawmakers should work swiftly to repeal these and other Obamacare taxes. If Congress fails to act, these taxes will crush millions of American families and small businesses.

Photo Credit: Charles Fettinger

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