I think the goal was to throw everyone off their insurance so nobody had a particularly good plan, and we all ended up on Obamacare. “Fairness”, perhaps?
My kid’s plan through the ACA was pretty great. She didn’t get “thrown off insurance”, but didn’t have a way to get it through either of her parents. But that is a totally different thread. 
The Cadillac tax was indeed part of the ACA. It’s an open question why employees should have tax subsidized health insurance, whereas people over 400% of the federal poverty line who buy their own insurance should not get any tax subsidy.
^Like I said, “fairness”. But if they didn’t want to make health insurance deductible to employers, they could have changed that, and some employers would have adjusted accordingly. Some wouldn’t have. Might have been difficult to force employers to provide health insurance without being able to declare it as a business expense, though.
I think the goal was to encourage employers to get people on plans where the individual assumes more of the cost, and therefore makes smarter choices about the medical care they consume. Low/no-deductible plans encourage over-use of medical resources since the employee bears essentially zero expense for any of their medical choices.
Public employee unions aren’t the only ones who have these kinds of plans.
In my state very few if any public employees are now covered by plans that would currently be subject to the Cadillac tax.
At current rates of insurance inflation, though, even a lot of B-level corporate plans will be hit with the Cadillac tax by 2020.
I don’t think it’s a question of the business being able to deduct it as an expense, rather the issue is whether the employee should pay taxes on the value of it.
My employer’s share of my health insurance comes to around $18K. Why shouldn’t I have to pay taxes on this?
It’s fairly recently that insurance got so expensive that this is a major tax expenditure. 20 years ago I think my health insurance cost was about 20% of what it is now.
@notrichenough - the fairness of the deductibility of expense employee benefits have been debated for many years - this is not a new thing. Have you ever heard of the repeal of IRS Section 89? As part of the 1986 Tax Reform Act, section 89 would have imposed a tax cap on the deductibility of employer-provided health benefits - but it was repealed as it would have been far too complex and administratively burdensome.
It’s not a big deal to pay taxes on a health insurance benefit if you make 500K, but for low income employees, paying taxes on a benefit, not money received, is excruciating. For example, at my company, part time, low hourly wage employees get health care benefits. They’d pay more in taxes than they make in income, potentially. The employer gets the tax break, and the employee would pay the taxes.
It is true that medical care and medical insurance have increased in price faster than general inflation. However, 20 years ago, you were 20 years younger.
^ I’ve never had a health insurance plan through my company that charged different amounts based on age. 20 years ago I had family coverage, same as today.
I don’t think the overall demographics of the companies I worked at then and now is all that different, so me being 20 years younger then doesn’t account for the high price I pay now.
Ditto here, NRE.
Our insurance through NYS employees has many different plans available (like a marketplace) that cost different depending on where in the state you are (downstate costs are higher than upstate) but your share of premium cost is also more as one goes up grades levels which, obviously, means you are earning more.
There might even be an age component also but I’m not really sure about that. I think NYS pays approx $16k of our premium and we pay $400/month - which includes all family members up to 26 no matter how many kids are in your family. We will pay the same when S ages out at 26. We pay no deductible if we stay in network and $1000 OON then it’s 80/20 until we hit max OOP which is only like $2500 per person.
They also pay both our Medicare premiums and the supplemental (the insurance I have now) from money in ones sick day account. In 27 years H has never taken one sick day so we will be covered 100% (unless something disabledly happens in his last 2 1/2years of service.)
It’s unusual for employers to charge employees different amounts based on their age. COBRA doesn’t do it either, typically.
Supposedly this bill is going to simplify the tax code. But what simplifications does it introduce, for businesses? Does it get rid of some of the loopholes and special regulations?
JCX-50-17 on https://www.jct.gov/ describes the House bill. It is rather long, if you want to go through it.
https://waysandmeansforms.house.gov/uploadedfiles/bill_text.pdf is the actual bill.
That’s probably true of nearly all employers over a certain size. But back when we were much, much smaller, our company had age-rated band and corresponding employee copayments. (COBRA was based on those bands.)
Here is a fascinating document put out by the Treasury department on tax expenditures. It calls out 169 separate items.
Far and away the largest expenditure is “Exclusion of employer contributions for medical insurance premiums and medical care”, at $221 billion for 2017.
Number 2 is “Exclusion of net imputed rental income”, which is basically saying you should be taxed on the income that you could have received if you chose to rent out your house rather than live in it.
I don’t really buy into the idea that this is anything other than the figment of an economist’s imagination, but thank god this isn’t on the table.
Top 13, for 2016, 2017, and summing over 2016-2025, in millions:
- Exclusion of employer contributions for medical insurance premiums and medical care 210,980 220,550 2,742,320
- Exclusion of net imputed rental income 101,100 104,950 1,178,800
- Capital gains (except agriculture, timber, iron ore, and coal) 92,820 95,870 1,057,770
- Deductibility of mortgage interest on owner-occupied homes 62,440 68,610 948,490
- Defined contribution employer plans 64,710 65,620 921,480
- Deferral of income from controlled foreign corporations (normal tax method) 67,780 71,170 852,580
- Step-up basis of capital gains at death 58,270 61,910 776,630
- Deductibility of nonbusiness State and local taxes other than on owner-occupied homes 51,380 55,130 692,640
- Defined benefit employer plans 66,600 66,760 622,530
- Deductibility of charitable contributions, other than education and health 44,240 47,630 601,390
- Capital gains exclusion on home sales 40,580 43,460 563,780
- Exclusion of interest on public purpose State and local bonds 31,700 35,900 501,150
- Deductibility of State and local property tax on owner-occupied homes 33,080 35,580 452,810
https://www.treasury.gov/resource-center/tax-policy/Documents/Tax-Expenditures-FY2017.pdf
It’s interesting to see which ones the tax bill is taking a swing at, and which ones are left alone.
“To see why imputed rent is a real form of income, consider two homeowners living in identical houses. Suppose they trade houses, each living in the other’s. They now pay rent to each other because the other is now the other’s landlord. If they pay identical rent, it would appear that it all cancels out, except that each now has rental income to report on her taxes.”
https://economix.blogs.nytimes.com/2013/09/03/taxing-homeowners-as-if-they-were-landlords/?_r=0
Thing is, if you believe in taxing imputed rent, why would you not also believe in taxing imputed income for childcare and domestic work?
Calling deductions “tax expenditures” and talking about imputing rent for your house carry with it a concept that everything you do belongs to the government and we should all consider ourselves lucky we are permitted to keep any of it.
After I asked myself the question about imputed income for childcare and domestic work, I decided to Google. Looks like I’m not the only one who had that question:
https://economix.blogs.nytimes.com/2013/09/09/valuing-houses-but-not-housewives/