Dems warn against ObamaCare tax delays
Some Democrats are raising concerns that an ObamaCare tax trade-off taking shape in Congress this week could whet the appetite of other industries looking to chip away at the law.
House and Senate leaders say they are inching closer to a year-end tax package — likely wrapped into the governing spending bill — that would pause both the healthcare law’s “Cadillac tax” and its medical device tax for two years.
Delaying the taxes would deliver a major win to labor groups and the medical device industry, respectively, after years of heavy lobbying against the provisions.
And even as most supporters of the law say they’d support a two-year delay of both taxes, some Democrats say they’re worried that it will only empower opponents to chip away at the law — jeopardizing its long-term fate.
“I’ve always been the position that the medical device tax should be paid for, in part because it sits alongside a broader set of gives for other industries,” Sen. Chris Murphy (D-Conn.), who leads Democratic messaging for ObamaCare, said Thursday. “It’s harder to get the medical device tax by itself.”
Democrats have long warned that eliminating a piece of ObamaCare affecting one industry, like the medical device tax, would have a domino effect. In the last week alone as chatter increased about the tax tradeoff, another industry — health insurer lobbyists — pushed to repeal its own tax, which is called the health insurance tax. An industry source said Thursday that a suspension of the health insurance tax is expected to be included in the final package.
Another strong supporter of the law, Sen. Claire McCaskill (D-Mo.), also said Thursday she was concerned about eliminating a key funding stream for the law.
“We’re all worried about how we support the Affordable Care Act and some of us are really worried about the giant tax extender package,” she said. “So yes, some of us are more worried about the fiscal result of repealing a bunch of taxes or extending tax breaks in terms of what we’re facing.”
She said she supports a temporary delay of both taxes, but said, “I’m not sure I’ll go so far as a repeal.”
Both the health benefits tax and the medical device tax were intended to raise revenue for ObamaCare — but with new tax dollars coming from vastly different sources.
The Cadillac tax, which levies a 40 percent tax on high health benefits, has been unpopular in both parties since it was written into ObamaCare. Opponents argue that it will almost certainly impact “Chevy” plans as well when it goes into effect in 2018, and that consumers will see an immediate downsizing of their benefits.
In a symbolic vote last week in the Senate, 90 senators supported an amendment repealing the Cadillac tax.
The 3 percent medical device tax, however, is aimed squarely at some of the largest companies in the country. And because it specifically targets the manufacturers — not companies selling the devices — the tax is not directly hitting consumers.
“I certainly care much more about the Cadillac tax than I care about the medical device tax,” Murphy said.
Opponents of the Cadillac tax, such as labor powerhouse AFL-CIO, had been hopeful that it would be repealed, or at least delayed, in this year’s budget package. GOP leaders have pushed Democrats to also consider a delay of the medical device tax, seizing on the enormous pressure to eliminate the health benefits tax by unions.
“That’s a major Democrat ask, so there needs to be something proportionate in terms of achievement on our side,” Se. John Cornyn (R-Texas) told reporters Wednesday when asked about supporting a Cadillac tax repeal.
Both taxes represent a rare area of bipartisan opposition within ObamaCare. Prominent Democrats like Sens. Al Franken (D-Minn.) and Elizabeth Warren (D-Mass.), who represent states with a heavy device manufacturing presence, have called for the repeal.
But the loudest voices in opposition have been Republicans, who argue it’s an unfair tax on company’s earnings.
“This is a tax on revenue rather than profit. It leads to some of the highest corporate tax rates in the world and creates undue harm to an industry that not only creates jobs but also improves our health and well-being,” Rep. Elise Stefanik (R-N.Y.) said from the House floor Wednesday.
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