House Progressives: Labor-White House Excise Tax Deal Helps All Workers

Art Levine

Yesterday’s breakthrough deal between the White House, labor leaders and congressional leaders on the excise tax on high-cost plans can help all workers and small businesses, not just unions, according to some House progressives and union spokesmen. A progressive Hill source also told In These Times, The push-back against the excise tax made the White House blink and think about new funding approaches This isn’t just for labor: All Americans get relief.”

The controversial 40% tax on so-called Cadillac” plans would have penalized as many as 31 million middle-class families – without any hard evidence it would either cut costs or raise revenues.

The new proposed deal raises sharply the threshold value of a plan (up to $27,000, possibly more) that can be taxed for high-risk jobs like firemen and policemen; postpones taxing plans reached by collective bargainining and in agreements with state and local workers until 2018; and raises the tax thresholds to reflect higher costs incurred by older and female workers.

Rep. Joe Courtney (D‑CT), who has been leading the opposition to the tax, said yesterday, IImportant modifications have been proposed that would help protect working families. Adjustments for older workers, high-cost regions, gender, and supplemental insurance, including dental and vision, sound very promising.” Courtney also said that he’d reserve final judgment on the compromise, but the signals from the Hill today were positive.

One Hill source close to progressive Democrats told In These Times that virtually All Americans will be affected by the higher thresholds.” He pointed out how the changes would lift a burden from women, seniors and those living in high-cost states.” He summed up, This is a very big deal.”

The search for alternative funding sources to make up for the supposed lost revenues – a chimera based on blind faith that employers would give raises to workers after they cut benefits under the old excise proposal – now begins in earnest. Among the provisions most likely to be included is a long-overdue Medicare tax on unearned, investment income for the wealthiest Americans.

Here’s how the new proposals were described by Richard Trumka, AFL-CIO President and others yesterday, as reported by the New York Times:

Under the bill passed last month by the Senate, the federal government would have imposed a 40 percent tax on the value of employer-sponsored health coverage exceeding $8,500 a year for an individual and $23,000 for a family. The tax would have taken effect in 2013. White House officials, Democratic Congressional leaders and labor unions said Thursday that they had agreed to an increase in those thresholds to $8,900 for an individual and $24,000 for a family. Moreover, they said, starting in 2015, the cost of separate coverage for dental and vision care would be excluded from the calculations.

In addition, they said, health plans covering state and local government employees and collectively bargained health plans would be exempt from the tax until 2018. This transition period addresses the concerns of schoolteachers and other public employees who have denounced the tax.

For people in certain high-risk occupations, including police officers and construction workers, thresholds would be higher: as high as $27,000 for a family.

In addition, the Times reported, Trumka, who led a team of labor leaders negotiating with the White House, said the thresholds would be increased for age and gender,” to reflect the higher premiums often charged for health plans with large numbers of women, older workers and retirees.

In addition, an AFL-CIO spokesman challenged the emerging right-wing spin that this is just a sell-out to so-called Big Labor.” The spokesman explained why collective bargained plans – and those for local and state workers, often covering workers who aren’t in unions – were given a transition period:

These plans were given transition time to adjust to the new rules and regulations, just like the time the insurance companies were given. At the very minimum working families certainly deserve the same rights thatthe insurance companies got. Many of the health care benefits under these plans were gotten in exchange for giving up higher wages. This transition period gives the plans and employers time to negotiate and adjust.

The spokesman emphasized the value of the compromise in a statement:

These changes protect the benefits of ALL middle class Americans.

Raising the threshold of the tax protects ALL Americans.

We protected the dental and vision coverage of ALL Americans.

We got extra protections for ALL women, seniors and people in high cost states.

We got extra relief for ALL state and city workers.

The deal we announced yesterday is JUST THE BEGINNING of improving the bill.

We are still working hard to make health care more affordable for ALL Americans and to control costs.

UPDATE: Here are the specifics of the new proposed way of handling he excise tax, as outlined by the AFL-CIO and others:

o Raising the threshold at which family plans are taxed from $23,000 to $24,000 in 2013 for all working families, with annual increases of Consumer Price Index plus one. The threshold for single plans will be $8,900. (Taft Hartley plans will be considered at the family rate.)
o Raising the threshold on plans further if health care costs grow
faster than expected from 2010 – 2013
o Exempting dental and vision costs beginning in 2015 (which could
raise the threshold as much as $2000)
o Raising the threshold for plans that have significant numbers of
women and/​or older workers.
o Preserving the original Senate proposal to raise the threshold
for plans with workers in high risk professions, affecting more than 9 million workers.
o Preserving the original Senate proposal that would raise the threshold for plans with retirees age 55 and up.
o Providing transitional relief for employers and workers to adjust to tax:
* Temporarily raising the threshold for high cost states, affecting more than 38 million workers.
* Providing a five year transition window for state and local employee plans and plans negotiated through collective bargaining agreements before they are subject to the tax, as typically done when federal laws affecting workers are enacted so that agreements will not have to be renegotiated.
o Giving bargaining plans the ability to go into the exchange beginning in 2017.

Art Levine, a contributing editor of The Washington Monthly, has written for Mother Jones, The American Prospect, The New Republic, The Atlantic, Slate​.com, Salon​.com and numerous other publications.
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