Economists Jump to “Cadillac Tax” Defense

Obamacare’s so-called Cadillac Tax is under fire from both the left and the right but not from a large number of economists and academicians.

In a letter sent to committee leaders in the House and Senate, 101 economists from such think tanks as the Brookings Institution and the Urban Institute argued that the tax should be retained and not, as an increasing number of both Republicans and Democrats are recommending, repealed.

“The Cadillac Tax will help curtail the growth of private health insurance premiums by encouraging employers to limit the costs of plans to the tax-free amount”, said the letter. Furthermore, it went on to say: “As employers redesign health insurance plans to hold costs within the tax-free amount, cash wages or other fringe benefits will increase.”

The so-called Cadillac Tax refers to Obamacare’s annual 40% excise tax on expensive health care plans—which are defined as plans starting in 2018 with annual premiums exceeding $10, 200 for individuals or $27, 500. This tax is meant to be paid by insurers and is not imposed on the total cost of the plan.

Republicans, in particular, have targeted the “Cadillac Tax” for repeal and recently both Democratic presidential candidates Hillary Clinton and Bernie Sanders have jumped on the Cadillac Tax repeal bandwagon.