This NY Times editorial is directly contrary to the widely held theory of trickle down economics in which tax cuts and tax increases on corporations necessarily gets passed through to consumers. In this case, the tax increases in on insurance companies, which will pass on the costs to insureds. As Ronald Reagan noted, and as many liberals on this Board have forcefully argued, just as tax cuts or other benefits to businesses will benefit the broad population, tax increases to business and corporations will indirectly harm the broard population.
http://www.nytimes.com/2010/01/16/opinion/16sat1.html?hp
The agreement between the White House, Congressional leaders and labor unions over taxing high-priced health insurance policies is a reasonable solution to an issue that was threatening to derail health care reform. The agreement treats unionized workers far more favorably than nonunion workers, the price for the support of important Democratic constituencies. But it would preserve the tax’s crucial role in slowing the rise in health care costs for decades to come.
When the Senate voted for the tax on high-priced employer-sponsored health insurance policies — “Cadillac plans” — labor leaders and many House Democrats complained that the tax would penalize middle-class people who had plans that were hardly lavish. They much preferred the House approach: a so-called millionaire’s tax, a surcharge on earnings above $1 million a year for couples.
A millionaire’s tax may not survive the negotiations on a final bill, but Congress has to find money to pay for health insurance for millions of Americans. The agreement makes that more difficult because it is expected to reduce the money generated by the excise tax substantially from the original Senate bill. Rich Americans and the industries involved in health care should pick up much of the added burden.
The proposed excise tax on high-cost plans is the most significant measure in either bill to slow the relentless rise in health care spending.
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The new agreement would take away the tax advantage for a small portion of the health benefit by imposing a 40 percent tax on the amount by which the premiums for employer-sponsored health coverage exceed specified thresholds. That would be $24,000 a year for a family, starting in 2013. The tax on a $26,000 plan would be $800, or 40 percent of $2,000. The insurance company would pay the tax but would almost certainly pass it along to the employer and its employees.
That $24,000 threshold, which was raised by $1,000 from the original Senate proposal, is well above the current average of $13,400 for a family plan. By 2013, more than 90 percent of all family plans are projected to still fall below the threshold. In the following years, the tax threshold would rise more slowly than the likely rate of inflation in medical costs, which could mean the plans of millions of workers — a small minority of the work force — would be subject to the tax in theory.
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