The “Cadillac” tax is known to be the excise tax on high-cost health care plans, and the authors of the article, N. Gregory Mankiw and Lawrence H. Summers, strongly support this policy. They believe that every family should have health insurance to avoid “the risks of financial insecurity, personal bankruptcy, and forgone essential care” due to the expensive medical treatment. However, some people tend too much for insurance, which, as a result, they become too quick to look for professional medical care or easily accept any unnecessary tests or treatments by the treatment. This leads health spending to be beyond what is optimal.
Some firms prefer paying their workers in the form of health insurance rather than in cask because compensation in form of wages is subject to income tax and payroll tax, while employer-provided health insurance does not. As a results, workers end up with excessive health insurance and low wages. The Cadillac tax comes in and solves this problem by placing a tax on the excess of insurance cost above threshold, “$10,200 for individual coverage and $27,500 for family coverage.” This gives companies an incentive to reduce insurance and pay more in wages. By increasing wages. firms are in an advantage in recruiting and retaining workers in the long run.
3 comments:
I think the idea of the "cadillac" tax is a good idea because it disincentives companies from providing excess health insurance, and they can pay their workers higher wages. Initially, this may hurt profit, but I believe it will help in the long run. Workers will be encouraged to work harder because they will be payed more. They will also return their jobs easier and help increase their profit in the long run.
I honestly had no clue that the "cadillac" tax existed, but I believe it is a good practice. This forces employers to pay more in wages and not skimp out their employees by offering exorbitant, yet unnecessary, coverage: this coverage would most likely go to waste. I agree with Aaron, because since this causes wages to increase it should increase worker efficiency. It would be interesting to see what the median and mean health insurance plans given to individuals and families were. The negative implication of this tax would be that it decreases spending on insurance, which in turn hurts the industry.
I also think the "cadillac" tax is reasonable, because it looks like government covers every workers with a "insurance", meanwhile the worker wages become higher. This tax is very useful to improve the economic environment and help workers hold their job which can lower the unemployment rate. However, As John said government do need to consider how much it will affect the insurance industry. Insurance companies may lost profit because of this tax.
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