What happens when union leaders threaten to derail a major piece
of Democratic legislation over a tax that would hit union health
benefits hard? Obviously, Democrats will reject special interest politics
and stand firm in defense of what they believe to be sound
policy cut a deal giving union members special
treatment. As hinted early in the week, the key part of the deal is
an exemption for union members' collectively bargained health care
plans. The Washington Post has the details:
A deal with the unions to tax high-cost plans would represent a
major step forward, however. According to a labor source familiar
with the talks, the agreement calls for a 40 percent tax surtax on
policies that cost more than $24,000 for family coverage and $8,900
for individuals, a slight increase over the levels in a bill
approved by the Senate on Christmas Eve. Dental and vision benefits
would be exempt, and the threshold for taxation would be raised by
at least $3,000 in high-cost states, for high-cost professions and
for workers whose policies cost more because of their age or their
Health plans negotiated on behalf of state and local workers, or
as part of collective-bargaining agreements, would be exempt for
five years after the 2013 effective date.
Phil Klein offers some perspective:
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[What this means is that] there could be two Americans receiving
the exact same benefits, but one American may be taxed and one
wouldn't, and the only difference would be one of them being a
member of a union. This is unseemly and unfair, even by the
standards of Obamacare. It has nothing to do with policy-making.
It's simply an outright bribe to a constituency that has
contributed handily to Democratic campaigns.
And that bribe will most likely come at a direct cost to others.
Exempting unions is
expected to reduce the $150 billion in revenue the tax was
supposed to raise by about $60 billion. So in order to make up for
the lost revenue, it's entirely possible that Democrats will
expand the Medicare payroll
tax to cover investment income.