National Journal's CongressDaily
June 1, 2009 Monday
PM Edition
Business Groups, Unions Tangle On Benefits Tax
BYLINE: Kasie Hunt
LENGTH: 396 words
Business leaders are accelerating a push to convince lawmakers that union contracts should not be excluded from changes to the tax exclusion for health benefits.
Business and labor unions are generally opposed to ending the tax exclusion for health benefits. But if such changes are made, lawmakers are considering grandfathering language that would protect negotiated union benefit contracts. This has caused alarm among business groups.
"Good policy should not be at the mercy of collective bargaining agreements -- if Congress decides to make this landmark change, the changes should apply uniformly," the U.S. Chamber of Commerce wrote last week to Senate Finance ChairmanMax Baucusand ranking memberCharles Grassley.
Furthermore, modifying the tax exclusion based on income or other factors would "foster class warfare" by ending the exclusion for some while not affecting others, the letter said. It added Congress should not index any health tax to the consumer price index, because healthcare costs have increased at a much faster rate than consumer prices.
Looking for more? For more on the healthcare reform debate, see our Healthcare Reform page.
"Preferred options would be indexing to the medical price index or perhaps the national health expenditures. The index should further good policy by giving no special consideration to high cost areas," said the letter, which was dated May 26.
Unions and business groups continue to disagree on other possible financing elements. Baucus has mentioned ending tax deductions for HSA contributions for people with high-deductible plans.
Unions would take the idea even further, while business wants to protect the deduction. As it stands, the deduction "favors the wealthy and may actually make the healthcare system less efficient overall," says a report issued last month by Citizens for Tax Justice and circulated by the Service Employees International Union.
The group's proposal would bar new contributions to HSAs but allow people to use savings they have already contributed to such plans. The report estimates the move would save the government $1.1 billion in 2012.
Business opposes changing HSA plans. "The revenue implications of changes to HSAs are so small that it becomes immediately obvious that this change is ideologically driven, rather than policy-driven," the Chamber's letter to the Finance Committee leaders said.