While many on the Left are cheering as Senate Republicans struggle to push through their effort to partially repeal and replace Obamacare, one liberal group stands to suffer if the GOP fails: Organized labor.
Union leaders for years have been trying to get Obamcare’s excise tax on expensive health insurance plans, known as the “Cadillac tax,” eliminated. The GOP’s repeal effort likely represents one of the best opportunities to do that.
In an open letter to Senate Democratic leaders last week, D. Taylor, president of Unite Here, which represents more than a quarter-million people in the service industry, chastised Senate Democratic leaders for not using the Republicans’ push as an opportunity to eliminate the tax. “As Democrats, you should be fighting to relieve — not impose upon — the majority of American workers who are being asked to shoulder a disproportionate share of taxes commensurate with their income,” Taylor said.
Unite Here spokeswoman Rachel Gumpert told the Washington Examiner that the union hopes the issue can be addressed through tax reform if Republicans fail in their Obamacare replacement quest. GOP leaders have said overhauling the tax code is next on their agenda. “With the clock ticking down to the 2020 implementation of the excise tax that was set under Obama, workers are already suffering the impacts of the tax as employers are threatening to cut coverage and raise employer costs, citing the tax. The excise tax could and should be addressed during the upcoming congressional tax reforms,” Gumpert said.
The 40 percent tax on high-premium plans, intended as a way to get them to foot much of Obamacare’s costs, was a key part of Obamacare’s funding. The law’s long-term projections will not work without the revenue it will provide. Unions that have negotiated generous health insurance coverage from employers, however, fear the tax will severely disrupt those plans, causing employers to pull back or stop offering them altogether. That is a major problem for unions, since insurance is one of the main benefits they offer to members.
Union leaders have wanted Democrats for years to agree to roll back the tax, but they have succeeded in only in delaying its implementation until 2020. The Senate GOP’s legislation would push that back another four years to 2024. Democrats slammed the delay as a sop to the rich, prompting Taylor to call the Democrats’ stance “offensive” and “intellectually dishonest.”
“The reality is that the 40 percent tax is already on the books, and if the healthcare of our workers and millions of others is taxed at 40 percent, it will incentivize employers to offer substandard healthcare to their workers, resulting in massive reductions to their health benefits and overall compensation. The tax is already forcing employers to boost out-of-pocket costs to the breaking point for working families,” Taylor warned.
Union leaders nevertheless generally sided with their Democratic allies in the fight over repealing Obamacare. “[Senate Majority Leader Mitch] McConnell seems to think a little window dressing and payoffs can do the trick. No payoff to any senator already opposed to this bill can justify giving tax cuts to large corporations and stripping healthcare from millions,” said AFL-CIO President Richard Trumka in a July 14 statement.
Diana Furchtgott-Roth, senior fellow for economics at the Manhattan Institute and director of its Economics21 Program, says the unions and the Democrats were caught between conflicting priorities. “They wanted the Cadillac tax repealed, but they didn’t want President Trump to look as though he fulfilled his campaign promise,” she said. Ultimately, defeating Trump took precedence.
Unite Here’s Gumpert argued that the problem was that the Republican bill didn’t go further than just delaying the tax’s implementation. “When federal Republicans in first the House and then the Senate scrapped every tax in the Affordable Care Act except for the excise tax — the one ACA tax that inordinately harms workers — it became clear to us that improving Obamacare for workers wasn’t a priority of Republican leadership,” Gumpert said.
The Senate GOP’s revised version of the Better Care Reconciliation Act would keep several Obamacare taxes, including a Medicare surtax and the 3.8 percent Net Investment Income Tax on high earners.
