Obama chief economist defends 'Cadillac tax'

President Obama’s chief economist delivered a strong defense of the “Cadillac tax" on health plans Tuesday morning, just hours before Congress is expected to unveil a budget deal that would again delay the measure.  

“It's really important to us that we don't see that measure repealed, and we will work hard to prevent that from happening,” Jason FurmanJason FurmanLiberal economists got the memo: Build Back Better couldn't possibly worsen inflation Biden should signal to the Fed that it's okay to raise rates next year The Hill's Morning Report - Presented by ExxonMobil - Biden hails infrastructure law, talks with China's Xi MORE, chairman of the Council of Economic Advisers, said at a Politico Morning Money event.

ADVERTISEMENT

The Cadillac tax, which imposes a 40 percent fee on health benefits above a certain threshold, is among several ObamaCare provisions that could be put on hold as part of the soon-to-be-released tax extenders package.

Those tax breaks have been negotiated alongside the $1.1 trillion government spending bill, which is expected to be released later Tuesday morning.  

The Obama administration has repeatedly said it wants to keep in place the Cadillac tax — as well as the medical device tax and the health insurance tax — but has come short of issuing a veto threat on the package. 

Democrats, led by House Minority Leader Nancy Pelosi (D-Calif.) and Senate Minority Leader Harry ReidHarry Mason ReidBottom line Voters need to feel the benefit, not just hear the message Schumer-McConnell dial down the debt ceiling drama MORE (D-Nev.), have been quietly negotiating a two-year moratorium of the provision since September, The Hill reported last month. 

“I can't tell you any, 'This provision we'd accept, this provision we wouldn't,' because it'll come together as a whole, and we'll be evaluating it as a whole,” Furman said.

The Cadillac tax has been one of the most controversial pieces of the healthcare law’s rollout, with labor unions and business groups particularly fearful that they will have to trim benefits to avoid the tax. Both leading Democratic presidential candidates, former Secretary of State Hillary ClintonHillary Diane Rodham ClintonRepublican Ohio Senate candidate slams JD Vance over previous Trump comments Budowsky: Why GOP donors flock to Manchin and Sinema Countering the ongoing Republican delusion MORE and Sen. Bernie SandersBernie SandersWTO faces renewed scrutiny amid omicron threat Overnight Health Care — Presented by March of Dimes — Abortion access for 65M women at stake Hospitals in underserved communities face huge cuts in reckless 'Build Back Better' plan MORE (I-Vt.), have said they would roll back the tax.

But economists, particularly within the White House, have argued that the tax has a larger role than simply collecting revenue for the healthcare law. They argue it puts pressure on healthcare consumers to limit unnecessary spending. As a result, it ultimately keeps prices low.  

“We certainly think that is an important health policy. It's about giving business and health insurance companies and individuals an incentive to figure out how to slow the health costs, that raises wages,” Furman said.