Democrats voice opposition to health care excise tax

October 7, 2009

Democrats voice opposition to health care excise tax


WASHINGTON – More than 100 House Democrats – including several members of Michigan’s congressional delegation – signed off on a letter today in opposition to an excise tax on high-cost insurance, asking House Speaker Nancy Pelosi to reject any such proposal.

Taking up a cause dear to the UAW and other unions who don’t want to see their members’ benefit plans caught by the tax, the letter signed by 157 House Democrats could cause a problem for health care reform, since the tax on high-cost plans was seen as a way to partially offset the huge price of expanding health care coverage.

Today, the Congressional Budget Office said health care reform legislation before the Senate Finance Committee could reduce the federal budget deficit by $81 billion over a 10-year period but to do so it is counting on more than $200 billion during that time from the excise tax on high-cost insurance plans. Those taxes would help offset an overall cost of $829 billion to get coverage to 91% of the people living in the U.S.

President Barack Obama has said he will not sign legislation unless it meets his test for not adding to the nation’s budget deficit over 10 years’ time.

Under Finance Committee Chairman Max Baucus’s proposal, an excise tax of 40% would be imposed on employment-based health plans with values over $8,000 for a single person and $21,000 for a family. The tax would be on only the value of the plan exceeding those thresholds.

Policies for workers in high-risk jobs and retirees over the age of 55 would have increased thresholds of $9,850 for single individuals and $26,000 for families before the tax kicked in. Alan Reuther, the UAW’s chief lobbyist in Washington, said this week that while the union was glad the legislation was amended to have a higher threshold for benefits to retirees under the age of 55, “We’re still unhappy with the overall excise tax.” The UAW is taking over retiree coverage for its members at Detroit’s automakers through voluntary employee benefit associations, or VEBAs.

U.S. Rep. Sander Levin, a Royal Oak Democrat, was one of those signing the letter to reject the proposal. He said the Joint Committee on Taxation has estimated the tax as originally proposed would hit approximately 15% of all employment-based plans in its first year and could hit nearly 40% by its seventh year.

“The proposed tax on benefits undermines a basic principle of the reform proposals – to build on the employer-based health care system,” said Levin.

Other Michigan members of Congress signing the letter were John Conyers and Carolyn Cheeks Kilpatrick of Detroit, Bart Stupak of Menominee, Dale Kildee of Flint and Mark Schauer of Battle Creek.


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