Labor Leaders Confront Obama On 'Cadillac' Tax Proposal

Labor leaders were invited to the White House to discuss negotiations to merge the House- and Senate-passed health overhaul packages.

The Washington Post: "The final bill will not include the House's government-run insurance plan, or 'public option'; it will probably include the Senate's new tax on high-cost health plans that could affect many union members; and its penalties for employers who do not provide insurance coverage will probably be closer to the more lenient terms in the Senate bill." Earlier in the day, AFL-CIO President Richard Trumka warned at the National Press Club that Democrats risk a replay of the "Democratic blowout in the 1994 elections, when, after the passage of NAFTA and other disappointments to unions, "'there was no way to persuade enough working Americans to go to the polls when they couldn't tell the difference between the two parties'" (MacGillis, 1/12).

The New York Times: During a private session designed to "search for a sort of compromise," President Barack Obama told the union leaders "that he remained committed to taxing high-cost insurance policies as a way to drive down health costs. But he also signaled that he was willing to amend the proposal to 'make this work for working families,' a senior administration official said."

The proposed 40 percent tax would affect family plans worth more than $23,000 and those worth $8,500 for individuals and could raise $149 billion in new tax revenues over 10 years. "According to one union survey, the tax would affect one in four union members. ... The machinists’ union announced Monday that its executive council had unanimously voted to oppose any health bill that was financed by taxing the value of workers’ existing health plans, and the general president of the International Association of Fire Fighters, Harold A. Schaitberger, accused Mr. Obama of abandoning his campaign promise not to tax the middle class.

Union leaders instead back a House proposal to raise a payroll tax on high-earning couples — those who make more than $1 million a year (Stolberg and Greenhouse, 1/11).

The Detroit News: The disagreement over the "Cadillac tax" has also attracted the attention of United Auto Workers President Ron Gettelfinger, who will be in Washington to fight the proposal. "Gettelfinger says he wants the tax eliminated — or at the very least an increase in the minimum level that would be taxed" (Shepardson, 1/12).

NPR: "The problem for President Obama is that the unions for years have been negotiating bigger and better health insurance packages in lieu of wage increases" (Liasson, 1/12).

The Associated Press: The White House has indicated that, though it will not disappear, "the tax may change so it hits fewer workers." For instance, "raising the threshold for the tax from $23,000 to $25,000 or higher" is one possibility under discussion. "The threshold has already been raised for first responders and workers in certain high-risk fields and the levy could be softened for more union professions" (Werner, 1/12).

The Washington Times: The 'Cadillac' tax and the House's plan to tax high-earning couples are not interchangeable. The House approach — a 5.4 percent tax "for families with incomes over $1 million or individuals over $500,000 — would raise about $460 billion over a decade." Meanwhile, the "Senate's $871 billion plan ... raises a smaller portion of its funding through the "Cadillac" tax, bringing in $149 billion over a decade" and is also "financed through cuts to Medicaid and Medicare funding and raise some money by taxing medical device makers, fining some employers that don't provide insurance coverage and some individuals who don't get it" (Haberkorn, 1/12).

PBS NewsHour also follows the debate over taxing the high-cost insurance plan and seeks the views of "Jonathan Gruber, a health economist at the Massachusetts Institute of Technology -- he is also a paid consultant to the Obama administration -- and Josh Bivens, an economist at the Economic Policy Institute" (Ifill, 1/11).

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