The federal takeover of the nation's health care system that Democrats are brewing up in Washington will have to be financed by someone. The administration wants to put it on the backs of the middle class in the form of a 40% excise tax on the value of health insurance coverage that exceeds $8,500 a year for individuals or $23,000 for families.
This isn't just another soak-the-rich scheme. This is going to hit the middle class — the schoolteachers, the steelworkers, the everyday folks of whom Bruce Springsteen sings so passionately.
That's why House Democrats and labor unions oppose it.
Those who think they'll be exempt from the tax because their health care insurance isn't one that Obama would define as a "super, gold-plated Cadillac" plan are kidding themselves. Douglas Holtz-Eakin, director of the Congressional Budget Office under George W. Bush, says 95% of Americans who are covered by plans that fit into the Cadillac category make less than $250,000 a year.
How much does your family's health insurance cost? Does it qualify as a "Cadillac" plan? That might depend on what sort of plan your employer or spouse's employer provides, or what you pay for as a self-insured person or business owner. And unless you're paying all of your health insurance costs yourself, chances are good that you don't actually know the cash value of your present health insurance benefits.
And what happens if the kind of insurance you presently have is actually a "Cadillac" plan? Some employers have said that such plans will simply be dropped, and employees given the choice only of less expensive, less comprehensive health care insurance. That makes sense, since neither employers nor employees can readily afford a 40% tax on health benefits. But if "Cadillac" plans are phased out of existence, then where exactly is the revenue to pay for health insurance reform supposed to come from?
Perhaps most troubling is that the kind of coverage that will be taxed here is the kind of coverage most Americans would like to have; in fact, many Americans still think the point of health care reform is to give them access to this level of coverage for much less than they would pay now (or, for those who really haven't been paying attention, for free). Instead, the goal seems to be to eliminate the kind of low-deductible, high coverage plan with access to all sorts of expensive options and low or non-existent co-pays that many Americans would, if asked, say they really want to have.
Obama promised no taxes on the middle class, but this provision of the health care bill may well amount to a de facto tax on the middle class, after all. Then again, Obama also promised that all the health care negotiations would be open to observation, and we can see how well that promise has been fulfilled.