Trump is urged to reject health law’s ‘Cadillac Tax’ and retain employee tax break | McClatchy Washington Bureau

Twenty-seven employer groups asked the Trump administration on Monday to reject calls to replace the Affordable Care Act’s “Cadillac Tax” on high-cost health benefits with a plan that caps the individual tax exclusion for job-based health coverage.

Premiums paid by employees for job-based health insurance aren’t taxed as income, which reduces the amount of payroll taxes and income taxes owed by workers.

The Congressional Budget Office estimated the exclusion – the largest tax break in the federal tax code – cost about $250 billion in lost tax revenue in 2013.

Some ACA replacement proposals would repeal the health law’s 40 percent “Cadillac Tax” on high-cost health coverage and replace that lost revenue by capping the amount of the individual tax exclusion.

The new funding would help fund premium tax credits, which help individuals pay for marketplace coverage.

In a letter to White House economic and domestic policy advisers on Monday, the employer groups called for “full and permanent repeal’ of the so-called Cadillac tax but urged that the individual tax exclusion be retained.

“Providing tax credits for purchasing individual coverage, or any other reforms to the health system, should not come at the expense of those who receive health care through their employer,” the groups wrote.

“Legislation that would cap the individual tax exclusion for employer-provided health benefits would be a direct tax increase on middle-class Americans and their families, as well as on the businesses Americans are counting on to create jobs,” the groups added.

The groups include the U.S. Chamber of Commerce, Associated General Contractors, the National Retail Federation and the American Benefits Council.

In another letter to the Trump administration, a coalition of public and private employers, labor unions and patient advocates argued that the Cadillac tax could undo years of sound tax policy. The “Cadillac Tax” is a 40 percent excise tax on job-based health plans that costs more than $10,800 a year for individuals or $29,100 for families in 2020.

“Raising taxes on workers does not control health care costs and could destabilize the employer-sponsored health care system that is efficient and effective in covering 177 million Americans,” read the letter from the Alliance to Fight the 40.