Baucus Modifies Tax on "Cadillac Plans"

The tax is a backdoor version of taxing employee benefits, something the Unions adamantly oppose and Obama attacked McCain over. Even limited it does established the precedent and although it may focus on "Cadillac Plans" for now, it could be easily used to tax all benefits if Congress had an eye to do it:

Sept. 30 (Bloomberg) -- U.S. Senate Finance Committee Chairman Max Baucus and fellow Democrats pledged to find a way to shield even more retirees and union workers from a tax on the most expensive health-care plans.

The panel, meeting for a sixth day to debate Baucus’s health-care legislation, discussed the issue at the request of Senator John Kerry, a Massachusetts Democrat who proposed the tax in July. Kerry said he was concerned that the levy, already modified once by Baucus, would still affect too many people.

The “Cadillac” tax represents the next major battle for insurers, who won a victory yesterday when the panel rejected proposals to create a government-run insurance program to compete with them. Kerry today asked panel members to craft the tax in a way that wouldn’t hurt union workers in “high-risk” industries such as coal mining and firefighting.

“The discussion of Cadillac plans doesn’t acknowledge ordinary people who gave up salary increases to get high-value plans,” said Senator Debbie Stabenow, a Michigan Democrat.Baucus originally proposed a 35 percent excise tax on plans worth more than $8,000 for an individual or $21,000 for a family. He then suggested increasing the tax to 40 percent, while lifting the thresholds to $8,750 and $23,000 for retirees or those in union-heavy industries like coal mining. Kerry wants to raise the thresholds to $9,800 and $25,000 and move them even higher for people between the ages of 55 and 65.

Financing Debate

Baucus told panel members this morning he hoped to get to the issue of financing his plan’s estimated $900 billion cost over 10 years. That means the Cadillac tax is likely to come up again.

The panel later approved an amendment by Florida Senator Bill Nelson to exempt elderly taxpayers from new limits on medical-expense deductions proposed in the bill. The legislation would allow out-of-pocket expenses to be deducted only after they exceed 10 percent of a patient’s income, up from 7.5 percent now. The change would raise $21 billion in revenue over the next decade, according to official estimates.

Considering Obama's pledge is for a deficit neutral number, politically this about more then doing favors for groups, its about providing a talking point for Democrats as way to jam this down the countries throat.