House In Revolt Over Excise Tax, White House Asks Unions to “Celebrate” It

[Omaha Steve]

http://www.inthesetimes.com/working/entry/5394/house_in_revolt_over_excise_tax_white_house_asks_unions_to_celebrate_it/

Friday January 8 6:23 pm

House members are continuing their strong opposition to the Senate excise tax on so-called "Cadillac" plans that a growing number of economists and labor unions say would raise costs for middle-class families and wouldn't "bend the cost curve," as proponents argue.

At the same time, as Huffington Post reported, the White House and some Senators are continuing to push the now-discredited notion that the by lowering health care benefits employers would somehow end up raising wages, thus generating more tax revenue. An earlier In These Times column dubbed this notion "voodoo economics for the punditocracy."

It's particularly galling to House Democrats the Obama administration is backing away from campaign attacks on the so-called Cadillac tax and the notion of taxing health care benfits, a stance that drew strong progressive support. As Rep. Joe Courtney (D-Conn.) recounts, he even pressed David Axelrod on the issue at a White House Christmas party: "You of all people should know what the problems are with this, and you went for McCain's throat on this."

"It's not the same approach," Axelrod countered, citing the indirect taxation method in the Senate that taxes corporations providing the costly plans.

"Tell that to a firefighter or a teacher," Courtney answered.

Still, as the Huffington Post reported today:

The Senate holds the cards, since the bill will die without a 60th vote. And they have the backing of the White House -- despite the fact that President Obama vigorously campaigned against the measure during the 2008 election. This Monday, labor leaders are being summoned to meet with the president to discuss their opposition. But already the arguments are being laid out to placate their concerns.

The Senate aide, when asked what how to reconcile the differences between the two chambers, said that they had to "convince unions that with this they can bargain for wages, not for health care." The logic, union officials argue, is more than a bit stretched, as employers seem likely to pocket the money saved on downsized health care plans rather then turn them into wage bumps. But the administration is also pushing this point.

"What you are basically doing is what should be celebrating," explained the administration official. "We are translating lower health care costs for higher wages. That is a good deal for workers."

FULL story at link.

[elehhhhna]

1. the WH thinks we're as stupid as the REEP base is.

[roguevalley]

12. unions tell wh to shove it and celebrate. that I can live with.

[golddigger]

2. Axelrod has his head up his ass!

[mdmc]

3. come celebrate our beatdown!

[Goldstein1984]

4. Do they think we are stupid?

Or do they just think we are powerless?

[SanchoPanza]

5. Is this the new hill to die on now?

A few points.

1) The survey cited in the linked HuffPo article in no way paints the notion that wages may go up as a result of the tax is "discredited". Go see the survey conducted by Towers Perrin here: http://www.towersperrin.com/tp/getwebcachedoc?webc=USA/2009/200909/HCR_Pulse-Survey_Sept-09_Final.pdf

The respondents say they don't plan on sharing any cost savings with employees. This is not surprising. Management never plans on sharing savings with employees on any costs they incur, but these plans typically don't survive contract negotiations.

The purpose of the tax is not so much to generate revenue, but to reduce the incentive to funnel money into benefits. Management has an incentive to do this because any wage increase they provide will be subject to payroll taxes, while benefits are not (they actually get a deduction, but it's mostly revenue neutral). The tax is not a general levy on all benefits, but a marginal rate beneath which benefits remain untaxed, and as such is intended to provide a cap above which putting further money into benefits becomes cost prohibitive. Whether or not those savings are passed onto employees is not subject to management fiat.

2) The tax is not on employees who have plans that go above the threshold. Iterations of the tax have called for it to be paid by either the employer negotiating the benefits package with the insurance company, or the insurance company itself. Those that are now campaigning against the tax as one that burdens employees, as far as I have seen, never mention this. Nor does anyone seem to mention that there are exemptions on plans that are justifiably more expensive, such as those procured by firefighters that Courtney so amiably seeks to defend. And the polls the article cites in order to scare Democrats about a potential voter revolt do not mention this as part of their questioning. To say that it amounts to a middle-class tax increase, or that employees will be in revolt over it after not giving those surveyed the full details on the proposal, is obscenely disingenuous.

There are two possible outcomes of the tax that depend on whom it's levied. If it's on the insurance companies, which the administration and a number of Senators support, then they will simply not offer such plans in the future. Or, if its on employers, they will no longer have an incentive to purchase these plans. Which is a bad outcome so long as you assume that HCR won't reduce costs in general.

3) The CWA study that opponents of the tax cite to arrive at the "One third of all health plans will be taxed by 2019" is flawed, and perhaps purposely so. This isn't mentioned in the article, but is common enough that it should be addressed.

The study assumes that medical inflation will continue on its current pace, gathering figures from the CMMS that do not incorporate ANY cost reduction provisions in either the House or the Senate bill (the majority of the provisions in both bills being largely identical). The study assumes that HCR will not bring medical inflation into parity with general inflation, in which case HCR will be a dismal failure whether it includes an excise tax or not, or they are deliberately omitting this from the study.

[Hello_Kitty]

6. IOW there are a good number of unknowns with this excise tax

Which means the Senate has no business claiming this tax will raise $150 billion in revenue and that 82% of it will come from wage increases. They have no basis to make that claim.

[SanchoPanza]

8. The CBO makes that claim.

Not the Senate.

[Hello_Kitty]

9. Not the CBO, the JCT

But either way, they can still be wrong.

[sabrina 1]

7. What's really unbelievable about their argument

that "We are translating lower health care costs for higher wages.

is the emphasis on 'costs'. This tax will most likely lower the 'cost' employers will pay to avoid the tax. But that is NOT the most important aspect of this devious plan. Aside from the claim, already proven to be wrong by most analysts, that this will raise wages, what is far more important is that it will actually take away benefits from people. It forces coverage down and saves money on treatment. Iow, they are turning the Republican talking point 'the government will interfere in your health care' into a reality.

This tax is so transparently an attempt to raise the profit margin of Private Insurance by not having to provide the best treatment available, that I can only think THEY think the public is just too stupid to get it. Because no one in their right mind could have thought the people would agree to the government telling them 'you cannot buy the best insurance coverage for yourself and your family because if you do, we will tax those benefits'. It is beyond devious, it is cruel.

You have to ask 'are they crazy'? Or, I'm beginning to wonder, just plain stupid. Maybe we have credited them with too much intelligence. Or does power and money blind people to this extent?

Everyone who cares about the survival of the Dem. Party has now told them that if this passes, it will be political suicide. The Republicans have already announced they will run on appealing this bill. And knowing what it contains, I can only sadly say, that will be a winner for them. I hope someone can talk some sense into them before it's too late.

[Hello_Kitty]

10. Yeah, and when the higher wages don't materialize, what then?

Because they won't.

[ArcticFox]

13. It'll be a large overall increase in costs

Employers' costs will go down a little. They will not pass on their savings. Employees' costs (co-pays, deductibles, responsibility %ages, max out of pocket) will go WAYYY UP.

Employees have no bargaining power. Unions are dead, and have been for years.

[sabrina 1]

14. I don't think people need to wait for that. We know

that won't happen. Someone is dreaming if they think that a business is going to save money on lowering people's benefits and then turn around and give it their employees. This is the same mentality that believed we didn't need regulations.

This is a completely faith-based policy. And to think it's coming from the people who claim they live in the 'reality based' community and are 'pragmatic'. I think they are either dreamers or snake-oil salesmen, but pragmatic and reality based they are not.

[ArcticFox]

11. Trading health care for wages?

If the unions wanted wages instead of health care, wouldn't you think they'd have negotiated for wages instead of healt care?

There is no chance employers will raise wages if health care costs go down. None.