President Obama will propose narrowing the so-called “Cadillac tax” on high-cost health care plans offered by employers in his fiscal 2017 budget, two of his economic advisers said Wednesday.
Writing in the New England Journal of Medicine, Council of Economic Advisers Chairman Jason Furman and chief economist Matthew Fiedler wrote that the budget, to be published next week, will propose raising the threshold for the cost of plans affected by the tax.
The change, they wrote, will prevent the tax from “creating unintended burdens for firms located in areas where health care is particularly expensive.”
The Cadillac tax was made law as part of the funding for Obamacare. It is also intended to slow the growth in health care costs created by the existing incentives in the tax code. Because employer-provided health insurance is excluded from taxable income, employers are effectively encouraged to give workers more expensive and generous plans than they would if the benefit were taxed.
While the tax is popular among economists, it is opposed by unions that have bargained for costly expensive plans as well as by business groups such as the U.S. Chamber of Congress and is generally viewed unfavorably in Congress. Congress voted in December to delay the imposition of the 40 percent excise tax from 2018 to 2020.
