Senate Votes to Repeal Cadillac Tax

The Cadillac tax remains front and center in the ongoing health care debate as, last week, the US Senate approved legislation that would repeal the Cadillac tax, among other Affordable Care Act provisions. While it’s predicted that the House of Representatives will also pass the bill, expectations are that President Obama will ultimately veto it. Even so, the approval of this legislation is an important step in the fight to repeal, or potentially amend, the excise tax (a two-year delay is now also a possibility). The Congressional Budget Office projects that this tax will raise about $87 billion dollars over ten years – about 25% of which will come from the tax itself, while 75% will come from income taxes on the higher wages that employers will pay their employees to make up for the reduction in health care benefit offerings. Still, as this USA Today article points out, this expectation may reflect a lack of understanding about how employers determine compensation; for instance, they may choose to enhance their retirement or life insurance benefits or reinvest their money, rather than increasing wages, which would mean a shortfall in the income tax revenue the White House is expecting.

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Tracy Watts
by Tracy Watts

Senior Partner, National Leader for U.S. Health Policy

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