Crushing the Caddy (tax)

    Jared Bernstein Posted by Jared Bernstein.

    From 2009 to 2011, Bernstein was the Chief Economist and Economic Adviser to Vice President Joe Biden, executive director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team.



    Crushing the Caddy (tax)

    It ain’t over til it’s over, but re the fortunes of the “Cadillac tax”–the excise tax on expensive health insurance plans that was to phase in by 2018 to help pay for Obamacare–a picture tells 90 billion words (that’s the revenue loss over ten years if the tax is repealed).

    The WSJ reports that while the situation is fluid, the ongoing budget and tax negotiations will likely include a two-year delay of the implementation of the tax. As OTE’ers know, while I have some misgivings, I support this ACA funding source, not solely because I think it embeds important cost-control incentives, but because “it is on the books, and if you repeal it, you will not be able to replace it.”

    “But no one’s repealing it!” you say. Just delaying it. To which I say, “ha!” A two-year delay takes its arrival date into the next administration, and as the Journal reports: “Republican presidential candidates have supported a repeal, as has Democratic front-runner Hillary Clinton.” As one R lawmaker put it, “If we repeal it today, we’re thrilled with that. But I think we can kill it over time, too.”

    And to be clear, it’s not just R’s driving that tank above. The Senate voted 90-10 last week for repeal.

    All of which goes to say that we are great at cutting taxes and terrible at raising revenues. And that will bite us–it already is.

    There’s a legislative-life-lesson here too: a tax increase delayed is a tax increase with a huge bulls-eye on its back. Pushing out the Caddy tax’s implementation may have looked politically expedient at the time, but that delay may well prove to have crushed it.