BEYOND THE NUMBERS
The House may vote on a year-end tax bill that, among other provisions, would delay or repeal four health-related taxes: the 2.3 percent excise tax on medical devices, the fee on health insurance providers (the “health insurance tax”), the excise tax on high-cost health insurance plans (the “Cadillac tax”), and the 10 percent tax on indoor tanning services. These taxes both raise needed revenue and represent sound public policy, and further delaying or repealing them would be unwise.
Medical device tax. The medical device industry has heavily lobbied Congress to repeal the device tax, but its arguments don’t withstand scrutiny. The tax will have a minimal effect on consumers; it doesn’t apply to eyeglasses, contact lenses, hearing aids, wheelchairs, or any other devices that the public generally buys at retail for individual use. The tax doesn’t cause manufacturers to shift production overseas, since it applies equally to imported and domestically produced devices. While the tax was in effect from 2013 through 2015, it had little or no discernable effect on employment or innovation in the device industry. Congress has suspended the tax through the end of 2019, and the House bill would suspend it for five more years.
Health insurance tax. An annual fee on most businesses that sell private health coverage to individuals, employers, and governments, this tax took effect in 2014 but policymakers suspended it for 2017 and 2019. The bill would suspend it for two more years. Health insurers say the delay would make coverage more affordable, but at best it would reduce individual market premiums by less than 3 percent, according to industry-sponsored estimates. Other policies, such as a permanent reinsurance program or increases in federal premium tax credits that help low- and moderate-income people buy health insurance, would do much more to make individual market coverage more affordable at much lower cost.
Cadillac tax. The excise tax on high-cost health plans is designed to slow health care cost growth by discouraging firms from offering extremely expensive health coverage that promotes excess use and inefficient delivery of health care. It’s a 40 percent excise tax on a plan’s value over a certain threshold, starting in 2022. Although the tax would initially apply to only a small share of premium dollars, it would significantly reduce national health spending in the long run and raise wages, the Congressional Budget Office projects.
The tax was originally scheduled to take effect in 2018, but it has been delayed twice and this bill would delay it for one more year. Rather than delay or repeal it, as we’ve written, policymakers should either modify the tax to address various concerns (as the Obama Administration proposed) or replace it with a similar measure to achieve cost-containment goals, such as a well-designed cap on the tax exclusion for employer-based health coverage (as several Republican analysts have suggested).
Indoor tanning tax. The Affordable Care Act placed a 10 percent, consumer-paid excise tax on indoor tanning services, which the Centers for Disease Control and Prevention labels as unsafe and which dermatologists say account for nearly 400,000 cases of skin cancer each year. The tax is having its desired effect, contributing to the roughly two-thirds reduction in the percentage of high school students using indoor tanning services between 2009 and 2017. The bill would permanently repeal the tanning tax, despite evidence that it’s a cost-saving public health intervention.
- El crédito tributario por hijos
- Federal Payroll Taxes
- Federal Tax Expenditures
- Fiscal Stimulus
- Marginal and Average Tax Rates
- Tax Exemptions, Deductions, and Credits
- The Child Tax Credit
- The Earned Income Tax Credit
- The Federal Estate Tax
- Where Do Federal Tax Revenues Come From?
- Where Do Our Federal Tax Dollars Go?