Last week, yet another damaging video emerged of Obamacare architect Jonathan Gruber talking about Obamacare’s “Cadillac tax.” The health care law assesses a hefty 40 percent tax on costly, so-called “Cadillac” insurance plans exceeding $10,200 for an individual and $27,500 for a family. However, Obamacare is structured such that the Cadillac tax is pinned to CPI inflation rather than medical inflation. Since the latter is much higher, over time the Cadillac tax would end up being a big tax hike on the middle class. Now economists on both sides of the aisle have argued that the tax exemption for employer-provided health insurance leads to inefficiencies and distortions, but that doesn’t excuse how Gruber and Obama dealt with this issue.
In the video, Gruber talked about how in a meeting with the president, the two discussed being intentionally deceptive about this matter since Obamacare would be less viable if it was widely known it contained a middle class tax hike. Via Jake Tapper at CNN, here’s the quote from Gruber that set off alarm bells:
“It turns out politically it’s really hard to get rid of,” Gruber said. “And the only way we could get rid of it was first by mislabeling it, calling it a tax on insurance plans rather than a tax on people when we all know it’s a tax on people who hold those insurance plans.”
That’s certainly an alarming quote, especially when you consider what was said about the tax in this 2009 op-ed in the Washington Post by, yes, Jonathan Gruber. It’s actually headlined “‘Cadillac’ tax isn’t a tax — it’s a plan to finance real health reform“:
But this argument misses an important point: The assessment proposed in the Senate is not a new tax; it is the elimination of an existing tax break that is provided to exactly these firms. But if they receive the same amount of compensation in the form of health insurance, they are not taxed. As a result, the tax code has for years provided a large subsidy to the most expensive health plans.
So if Jonathan Gruber is to be believed, back in 2009 Jonathan Gruber knowingly lied and with a great deal of forethought. In 2009, he repeatedly insisted that the Cadillac tax was “not a new tax” for political expediency even though he would later admit “we all know it’s a tax on people who hold those insurance plans.” (As another matter, it is also telling that liberal writers routinely characterize a tax exemption as a “subsidy,” a notion predicated on a positively Orwellian assumption that all wealth belongs to the government, which has the ultimate say in how it’s distributed.)
Given this shocking mendacity, liberal writers — and even President Obama — have done their best to suddenly pretend that Gruber wasn’t intimately involved in the crafting of Obamacare, when clearly he was. While New York’s Jonathan Chait has dabbled in Gruber Trutherism, he’s also advancing another bizarre defense — Obamacare’s Cadillac tax is also a GOP idea and they’re hypocritical or something for making an issue of it:
Troy’s op-ed also fails to mention that he himself used to oppose the tax break for employer-sponsored health insurance. In a 2007 speech, he explained that Bush proposed to cap the health-insurance tax deduction to exclude the more expensive plans.
Not only that, the dastardly Bush health plan Troy worked on actually had a lower threshold for when the tax would kick in on family plans! Frankly, this is an absurd attempt to push back against Gruber’s deceptions about the tax. While Gruber was wrong to lie about the nature of the tax, he wasn’t wrong that eliminating the exemption is also a financing mechanism — one that would’ve generated $303 billion in government revenue last year, according to Troy. What you do to finance health reform once you start collecting this new revenue is what matters most for health care reform, since economists of all ideological stripes agree the exemption is distorting the insurance market. In the case of Bush’s proposed health plan, they mitigated the distortionary effect on insurance markets by eliminating the exemption but then blunted the potential tax increase by giving people a standard deduction of $7,500 for individual coverage and $15,000 for family coverage.
Running for president in 2008, McCain proposed a similar plan of eliminating the exemption with credits to offset any tax increases. Obama proceeded to demagogue the hell out McCain’s plan, and in 2009 he told PBS he was concerned that the McCain/Bush approach would still result in a tax increase:
What’s being talked about now, I understand, is the possibility of penalizing insurance companies who are offering super, gold-plated, Cadillac plans. I haven’t seen the details of this yet, but it may be an approach that doesn’t put additional burdens on middle-class families. My whole goal is not to add burdens to folks who are already having tough times affording insurance, but actually to relieve it.
So, Obama flip flopped big time. Not only does Obamacare gradually eliminate the employer exemption, if Gruber is to be believed, Obama was aware that he was misleading the American public about how they were going to be hit with new taxes. Obamacare also contains no provision to counterbalance the Cadillac tax hitting an ever larger percentage of Americans, so when Obama says he’s concerned that the McCain/Bush tax credits “wouldn’t be sufficient” to offset the costs associated with eliminating the employer exemption, it’s hard to take him seriously. And his supposed concern that eliminating the exemption and providing tax credits would be too disruptive or cause employers to drop coverage is certainly at odds with the way that Obamacare’s onerous mandates actually are cancelling millions of plans and causing employers to drop coverage.
The bottom line is that GOP wonks such as Troy favored looking at a tax on Cadillac plans to smooth out insurance markets by limiting the insurance exemption for expensive plan recipients but then taking that revenue to provide tax credits blunting the tax increase. That is a very, very different policy than supporting a Cadillac tax to pay for Obamacare which further distorts markets through redistribution of direct government subsidies, and does nothing to ameloriate the tax burden imposed by Obamacare’s gradual removal of the insurance exemption. Nor does it equalize the tax treatment between those purchasing insurance as individuals and those who get it from their employers.
Now, you can argue the relative merits of either plan — and I think the fact that guys like Jonathan Gruber admit they had to lie like a rug to convince people Obamacare is a good idea speaks for itself. Further, Troy is no dilettante. He’s a former deputy secretary of Health and Human Services and has written an extensive white paper on impact of Obamacare’s Cadillac tax. But for Chait to argue that it’s disingenuous for a Republican such as Troy to criticize how Obamacare deceptively implements a Cadillac tax and what it’s specifically paying for, just because Bush also used the words “Cadillac tax” is to ignore qualitative differences in both policy approaches so vast it is beyond inane.
Chait’s no dummy, but this is a seriously misguided critique. I’m inclined to give him the benefit of the doubt, as he’s not the only Obamacare supporter lashing out in the wake of Gruber’s damaging revelations. Unfortunately for Chait, after Gruber’s comments, it’s getting harder and harder to tell when Obamacare’s supporters are being intentionally misleading.
