What happens when union leaders threaten to derail a major piece of Democratic legislation over a tax that would hit union health benefits hard? Obviously, Democrats will reject special interest politics and stand firm in defense of what they believe to be sound policy cut a deal giving union members special treatment. As hinted early in the week, the key part of the deal is an exemption for union members' collectively bargained health care plans. The Washington Post has the details:
A deal with the unions to tax high-cost plans would represent a major step forward, however. According to a labor source familiar with the talks, the agreement calls for a 40 percent tax surtax on policies that cost more than $24,000 for family coverage and $8,900 for individuals, a slight increase over the levels in a bill approved by the Senate on Christmas Eve. Dental and vision benefits would be exempt, and the threshold for taxation would be raised by at least $3,000 in high-cost states, for high-cost professions and for workers whose policies cost more because of their age or their gender.
Health plans negotiated on behalf of state and local workers, or as part of collective-bargaining agreements, would be exempt for five years after the 2013 effective date.
Phil Klein offers some perspective:
[What this means is that] there could be two Americans receiving the exact same benefits, but one American may be taxed and one wouldn't, and the only difference would be one of them being a member of a union. This is unseemly and unfair, even by the standards of Obamacare. It has nothing to do with policy-making. It's simply an outright bribe to a constituency that has contributed handily to Democratic campaigns.
And that bribe will most likely come at a direct cost to others. Exempting unions is expected to reduce the $150 billion in revenue the tax was supposed to raise by about $60 billion. So in order to make up for the lost revenue, it's entirely possible that Democrats will expand the Medicare payroll tax to cover investment income.