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Statement From Health Economists and Policy Analysts About Excise Tax on High-Cost Plans

A bipartisan group of prominent health economists and policy analysts have sent Congress the following letter about the Affordable Care Act’s excise tax on high-cost employer-sponsored health coverage.

Click here to view a PDF version of this letter.

July 29, 2019
The Honorable Mitch McConnell
Majority Leader
United States Senate
The Honorable Charles Schumer
Minority Leader
United States Senate

Dear Senator McConnell and Senator Schumer,

The House of Representatives recently voted to repeal the “Cadillac tax,” an excise tax on high-cost employer-sponsored health coverage (above a tax-free amount). For the reasons set forth below, we urge the Senate not to repeal this tax.

For decades, economists and health policy experts of all political persuasions have agreed that the unlimited exclusion of employer-financed health insurance from income and payroll taxes is inflationary, inefficient, and regressive. The Affordable Care Act established the Cadillac tax to address these issues.

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. The excise tax will discourage the provision of insurance that covers such a large proportion of health care spending that consumers have little incentive to insist on cost-effective care and providers have little incentive to provide it. As employers redesign health insurance plans to hold costs within the tax-free amount, cash wages or other fringe benefits will increase. Furthermore, repealing the Cadillac tax would add directly to the federal budget deficit, an estimated $197 billion over the next decade according to the Joint Committee on Taxation.

We, the undersigned health economists and policy analysts, hold widely varying views on other provisions of the Affordable Care Act, and we recognize that measures other than the Cadillac tax could have been used to restrict the open-ended health insurance tax break.

But we unite in urging Congress to take no action to weaken, delay, or reduce the Cadillac tax until and unless it enacts an alternative tax change that would more effectively curtail cost growth.

Sincerely,

Henry Aaron
Brookings Institution
Loren Adler
Brookings Institution
David Yves Albouy
University of Illinois
Joseph Antos
American Enterprise Institute
Aviva Aron-Dine
Center on Budget and Policy Priorities
Alan Auerbach
University of California
Martin Baily
Brookings Institution
Laurence Baker
Stanford University
Ernst Berndt
Massachusetts Institute of Technology
Robert Bixby
Concord Coalition
Barry Bosworth
Brookings Institution
Alex Brill
American Enterprise Institute
Gary Burtless
Brookings Institution
Stuart Butler
Brookings Institution
Kate Bundorf
Stanford University
James C. Capretta
American Enterprise Institute
Amitabh Chandra
Harvard University
Michael Chernew
Harvard University
Barry Clendenin
George Mason University
David Cutler
Harvard University
Patricia Danzon
University of Pennsylvania
Angus Deaton
Princeton University
Peter Diamond
Massachusetts Institute of Technology
Avi Dor
George Washington University
Mark Duggan
Stanford University
Douglas Elmendorf
Brookings Institution
Ezekiel Emanuel
University of Pennsylvania
Yevgeniy Feyman
Boston University
Matthew Fiedler
Brookings Institution
Robert Fellner
Nevada Policy Research Institute
Austin Frakt
Boston University
Jason Furman
Harvard University
William Gale
Brookings Institution
Martin Gaynor
Carnegie Mellon University
Paul Ginsburg
University of Southern California
Sherry Glied
New York University
Marc Goldwein
Committee for a Responsible Federal Budget
Joshua Gotbaum
Brookings Institution
Gordon Gray
American Action Forum
Jonathan Gruber
Massachusetts Institute of Technology
Holly Harvey
Committee for a Responsible Federal Budget
Ron Haskins
Brookings Institution
Tara O’Neill Hayes
American Action Forum
Christopher Holt
American Action Forum
Doug Holtz-Eakin
American Action Forum
Jill Horwitz
University of California
Robert Huckman
Harvard University
Paul Hughes-Cromwick
Altarum Institute
Robert P. Inman
University of Pennsylvania
Benedic Ippolito
American Enterprise Institute
Damon Jones
University of Chicago
Helen Levy
University of Michigan
Frank Levy
Massachusetts Institute of Technology
Erzo Luttmer
Dartmouth College
Robert Litan
 
Maya MacGuineas
Committee for a Responsible Federal Budget
Eric Maskin
Harvard University
Aparna Mathur
American Enterprise Institute
Thomas McGuire
Harvard University
Ellen Meara
Dartmouth College
David Meltzer
University of Chicago
Bruce Meyer
University of Chicago
John McDonough
Harvard University
Cecilia Munoz
 
Len Nichols
George Mason University
Maurice Obstfeld
University of California
Michael O'Hanlon
Brookings Institution
Harold Pollack
University of Chicago
Daniel Polsky
University of Pennsylvania
Robert Pozen
Robert Pozen
Robert Reischauer
Urban Institute
Ben Ritz
Progressive Policy Institute
Christina Romer
University of California
Avik Roy
Foundation for Research on Equal Opportunity
Christopher Ruhm
University of Virginia
Andrew Samwick
Dartmouth College
Isabel Sawhill
Brookings Institution
Douglas Shackelford
University of North Carolina
Sita Slavov
George Mason University
Neeraj Sood
University of Southern California
Eugene Steuerle
Urban Institute
Betsey Stevenson
University of Michigan
Michael Strain
American Enterprise Institute
Katherine Swartz
Harvard University
John Taylor
Stanford University
Richard Thaler
University of Chicago
Grace-Marie Turner
Galen Institute
Ani Turner
Altarum
Laura Tyson
University of California
Stan Veuger
American Enterprise Institute
Alan Viard
American Enterprise Institute
Paul Van de Water
Center on Budget and Policy Priorities
Gail Wilensky
Project HOPE
Roberton Williams
University of Maryland
Kyle Wingfield
Georgia Public Policy Foundation
Justin Wolfers
University of Michigan
Richard Zeckhauser
Harvard University

 

*Organization affiliations are listed for identification purposes only.