Tuesday, February 23, 2010

Is the Cadillac Tax the New AMT?

This morning’s column by David Brooks makes an interesting analogy between the “Cadillac tax” and the “doc fix,” arguing that, having succeeded in pushing the implementation of the tax back to 2018 in the latest White House health proposal, Democrats will end up postponing the new tax permanently through a series of temporary “fixes,” as Congress has done with the Medicare sustainable growth rate (SGR) mechanism and the alternative minimum tax. Keep in mind however that the level of deficit savings claimed by Democrats rests largely on implementation of the “Cadillac tax” provisions; if the tax disappears, so does any notional savings. Remember too that this is not the only “AMT-like” provision in the health care bills – the Senate legislation increases the payroll tax for individuals with incomes over $200,000, and families with incomes over $250,000, but does NOT index those provisions for inflation, so more middle-class families will be hit with this tax increase over time.

It’s also worth noting that while Mr. Brooks started out with great enthusiasm for President Obama and health reform, he now writes of a “tawdry tale” of “Washington gimmick[s]” that create a “fiscal time bomb” for future generations. In that sense, Brooks’ warnings sound a noteworthy omen: The longer Democrats spend plotting their government takeover of health care, the farther they get from the kind of change Americans can believe in.