Congress wisely abandoned an earlier proposal to cap the current tax exclusion for employer-sponsored health care, which was rife with problems. Now, unfortunately, the Senate Finance Committee is moving toward a different proposal, an excise tax on insurance coverage, which would not only create the same problems as the original proposal – but would add new ones.
The new excise tax would not only disproportionately burden workers whose coverage is more expensive because they work in businesses that are smaller or employ more older workers, as the earlier proposal would have done. It would also add a more regressive tax burden to low- and middle-income workers.
In a new Economic Policy Institute policy memo, EPI’s director of health policy research, Elise Gould, explains that although the tax exclusion cap on health benefits was a bad idea, this new excise tax is even worse.