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Cadillac tax repeal on Senate's post-recess to-do list

Sen. Dean Heller (R-Nev.) plans to introduce legislation to repeal the Affordable Care Act's Cadillac tax when Congress reconvenes after Labor Day, according to National Journal

Cadillac Series 62 Convertible 1959
It's not your grandfather's Cadillac that we're talking about in connection with Obamacare, although having this 1959 finned baby in my garage would definitely make me feel much better. The Affordable Care Act's Cadillac tax is a levy that will affect expensive employer provided medical coverage starting in 2018, unless it's repealed. (Image courtesy Travel and Trade South Africa)

The 40 percent tax on high-cost health care coverage (hence the Cadillac nickname) over a certain threshold -- $10,200 for individuals and $27,500 for family -- doesn't take effect until 2018. The money is supposed to pay for expanded government spending on health care and slow the rising costs of health care.

Heller's bill will put the latest Obamacare fight in the Senate's hands, rather than in the House where outright repeal of the health care law has been approved 743 times. OK. Maybe only 56 (or a few more by some counts) votes.

The Senate, however, generally has shied away from Obamacare battles, in part because its procedures make it harder to get to actual debates (and votes) on the issues. So even though the upper chamber is now in GOP control, it's notable that an attempt to kill a portion of the ACA is expected to part of its upcoming agenda.

Everyone hates the tax: Even more notable than the Senate willingness to engage on Obamacare is that there is bipartisan sentiment to do away with the Cadillac tax.

Plus, in addition to Democrats and Republicans agreeing that they hate the tax, big business and labor unions also are united in their dislike of the tax.

Conventional wisdom is that with so many groups coming together against the tax, it's a goner. The House passed its own bill to rescind the Cadillac tax in June.

But, notes National Journal, "the vicious politics surrounding Obamacare will complicate any effort to get a repeal across the finish line."

By repealing the Cadillac tax, Republicans would surrender a talking point against Obamacare as a whole. Democrats who agreed to repeal the tax would give up a provision that helps pay for the health care reform law.

And, of course, there's the matter of overriding the veto the president would use against efforts to undercut his signature legislation. 

With so many opposed to the Cadillac tax, it would make sense to simply come up with a way to revise the law or replace it with some other more acceptable to all way to raise the money. That presumes, however, that Representatives and Senators can or would be willing to use common sense in doing their jobs.

I suspect any changes to the Cadillac tax won't come until after the 2016 presidential election. That won't give lawmakers much time to work on legislation, but the make-up of Congress and the occupant of the White House after the election could offer some clarity on where the Affordable Care Act stands.

FSA danger: Meanwhile, folks who have medical flexible spending accounts, or FSAs, will have to wait and see whether the excise tax on expensive health care plans tax will affect those accounts.

Bankrate Taxes Blog logoAs I noted last week at my other tax blog, some companies already are taking steps to ease the potential Cadillac tax.

One option is to further limit or do away with the tax-favored workplace accounts, meaning that the Cadillac tax could kill FSAs.

Also over at Bankrate Taxes Blog last week, I looked at how and why some restaurants are switching to no-tipping policies. Until that happens, though, eatery servers need to remember that gratuities are taxable income

I usually post my additional tax thoughts at Bankrate on Tuesdays and Thursdays. If you don't make over there to check them out then, you'll find my synopses and links here at ol' blog over the weekend.

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