Dems optimistic for ‘Cadillac tax’ repeal

Democrats are growing more confident that they’ll win their battle with the White House over whether to include the repeal of ObamaCare’s “Cadillac tax” on high-cost insurance plans in a package of tax extensions both parties want to approve before the end of the year.

Unions have long wanted to kill off the tax, and they have new leverage with Democrats readying for next year’s election, when labor’s support will be crucial for the party.

{mosads}The tax extenders package has also become a better option for the Cadillac tax’s repeal because there are no plans to offset extending the tax cuts with corresponding spending cuts.

Rep. Joe Courtney (D-Conn.) and other lawmakers say that because the extenders package is not offset, it’s a more likely vehicle for the tax repeal than a must-pass spending bill that Congress is also tackling in the final weeks of the year.

“There’s clearly discussions going on for this package,” Courtney said at a Capitol Hill briefing Wednesday.

Including the Cadillac tax repeal, however, would greatly increase the bill’s overall price tag.

That will cost the legislation the votes of some Republicans, as budget hawks are voicing concerns that the package could add $800 billion to the deficit.

Repealing the Cadillac tax would cost about $93 billion, according to a report by the Congressional Budget Office released Wednesday.

The biggest hurdle to repealing the tax is the White House. Officials across the administration have forcefully defended it as both a key source of revenue and as an incentive to reduce the overall costs of healthcare.

But Rep. Frank Guinta (R-N.H.), who drafted the House GOP’s version of the repeal bill, says he sees an opening.

“They haven’t outwardly over the last year said, ‘No way it’s off the table.’ The fact that they’ve been silent, I think, is good news,” Guinta told The Hill on Tuesday.

The tax package also was a key point of discussion at Wednesday’s House Democratic Caucus meeting.

The efforts to ditch the tax, which House Democrats, including Courtney, have opposed since the creation of ObamaCare, has been lifted by a campaign called the Alliance to Fight the 40.

That coalition includes dozens of groups, from the Blue Cross Blue Shield Association to the American Cancer Society, that have warned that millions of middle-class workers will see the effects of the tax, which has yet to be implemented, as soon as contract negotiations begin this year. The tax officially goes into effect in 2018.

Guinta and Courtney, along with Senate counterparts Sens. Dean Heller (R-Nev.) and Martin Heinrich (D-N.M.), penned a letter to Obama last month seeking a meeting on their proposal to kill off the tax. They say they haven’t yet heard back.

“We are kind of waiting on the White House. The House and Senate seem to be in sync on this,” Guinta said.

The Cadillac tax is far from the only hurdle to finishing the tax package, which would give new life to a number of expiring tax breaks. Another sticking point is that Democrats want to index tax credits for low-income working families to inflation, which Republicans oppose. The GOP wants changes to the credits that they say would prevent fraud and abuse, but those tweaks are opposed by Democrats.

The legislation would make permanent the expansions of the Earned Income Tax Credit, the Child Tax Credit and the
American Opportunity Tax Credit that were enacted in the stimulus law. Democrats back those changes.

It would also make permanent a number of expired tax breaks backed by Republicans, including the research and development tax credit and the tax deduction for state and local sales taxes.

“There is no deal on bipartisan tax extenders legislation,” Julia Lawless, a spokeswoman for Senate Finance Committee Chairman Orrin Hatch (R-Utah), said in a statement Wednesday. “Members are continuing discussions to develop a workable package that will provide responsible tax relief for American families and job creators.”

House Ways and Means Committee ranking member Sandy Levin (D-Mich.) said the deal “remains up in the air, both as to the size and the content.”

Rep. Kevin Brady (R-Texas) and his predecessor as chairman of the House Ways and Means Committee, new Speaker Paul Ryan (R-Wis.), are both involved in the talks.

“Ways and Means is negotiating a package of tax provisions to help families and grow the economy, and the Speaker has urged Democratic leaders to consider it,” Ryan spokeswoman AshLee Strong said.

The dozens of tax breaks that expired at the end of 2014 must be renewed by the end of this year so that people have certainty when they file their 2015 tax forms and so that the Internal Revenue Service does not delay the tax filing season. If a deal on making some of the tax breaks permanent and eliminating the Cadillac tax isn’t reached, Congress could choose to renew the expired provisions for one or two years.

Last year, discussions about a deal to make some extenders permanent fell apart when the White House came out against it, and Congress ended up passing a one-year bill.

When asked if he thinks there will be a bigger deal, Levin said, “Nobody knows.”

Top lawmakers, including Ryan, have called for earlier negotiations this year, looking to avoid the kind of last-minute deal reached in the past. But with just days left before lawmakers depart for their December recess and a spending bill still on the agenda, time is running out.

– This post was updated Thursday at 2:39 p.m.