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Employer lobbying group maintains drumbeat for Cadillac tax repeal

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The basic underlying assumption of the health care reform law's “Cadillac” tax — that it will raise billions of dollars in new federal revenues — is flawed, and the provision should be repealed, an employer benefits lobbying group says.

Under that provision, scheduled to take effect in 2020, a 40% excise tax will be imposed on the portion of group health care plan premiums that exceed $10,200 for single coverage and $27,500 for family coverage. The Congressional Budget Office last year estimated that the tax would raise $87 billion over a seven-year period.

In testimony submitted to the House Ways and Means Committee, which held a hearing Thursday on the excise tax, the Washington-based ERISA Industry Committee described that estimate as “erroneous” and “baseless.”

Specifically, ERIC says that is no evidence that employers who cut benefits to avoid triggering the tax would, as the CBO predicts, increase employees' taxable wages.

That “is a purely theoretical argument,” ERIC said.

What is fact, ERIC said, is that the tax's complexity is “virtually unimaginable” and that the tax would not just be triggered by “generous” plans.

In fact, the tax hits “plans that are expensive because they cover individuals in high cost areas, have high percentages of older, sicker people and/or have a large gender imbalance, among other things,” ERIC said in its testimony.

In January, lawmakers approved legislation that would have repealed the excise tax, but later failed to override President Barack Obama's veto of the measure.