This is the Kator Daily Podcast for Monday, August 26, 2019.

I'm Caleb Brown.

The Cadillac Tax, a tax on generous health plans embedded in Obamacare is likely to go away. Why?

Well, as David Hyman, co-author of the Cato book Overcharged, will tell you,

the rule in Washington is dessert first, spinach later. We spoke last week. So I'm going to describe

the tax in a minute but let me just start by telling you why people call it the

Cadillac tax which is that for a long time health economists have sort of debated

whether people should be able to choose differing levels of generosity in their

health plans and the natural instinct I guess was to use car types as an indication of

different levels so you know you could have a Chevy policy that covered a lot of stuff but didn't cover everything and then a

Cadillac policy which covered all the bells and whistles and then when it came

time to figure out a way to fund Obamacare and also address an underlying problem in the way in which

health insurance is treated by the tax system.

Health economists I think just grabbed on to the idea of a Cadillac tax, which the way it was structured

was if the cost of your coverage exceeded a particular threshold and the amount of that threshold

was tied to whether it was a single individual or a family policy,

then your employer would owe an excise tax of 40% of the excess of the cost of the policy over that

threshold. So those thresholds were about $10,000 for an individual policy and

about $30,000 for a family policy. And that was included in the original Obamacare legislation which passed in 2010.

The tax was supposed to take effect in 2018.

So far it's been postponed twice, and now a bill is passed the House of Representatives to

kill it entirely, rather than just keep rolling it over. So, what was the impulse that drove lawmakers to accept the idea that more generous health insurance ought to be taxed

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