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Should Unions Get Special Treatment in Health Reform?

One of the big challenges for health-care reformers who want to see the employer tax exclusion capped is the fact that labor unions, who are generally their allies on health reform, are dead-set against the idea. Now, Sen. Max Baucus (D-Mont.) appears to be floating an unexpected solution: exempt health benefits set as part of an existing collective-bargaining agreement.

I see the short-term appeal of the proposal. It retains most of the revenue and neutralizes an important source of opposition. But it's pretty crass. The benefits won by workers in collective bargaining agreements are no more sacrosanct than the benefits negotiated by an individual worker when he settled on the terms of his job. And it's not hard to see the dangers of the (accurate!) attack that "Democrats want to tax your health benefits -- unless you join a labor union that donates mainly to Democrats." The last thing you want when levying a new tax is to make it look like an unfair new tax, or a new tax that mainly benefits your favored special interests. Like everyone else, union members -- particularly those in the aging industries that offer the best benefits -- have much to gain from health-care reform. It's not crazy to ask them to help pay for it.

By Ezra Klein  |  June 10, 2009; 2:25 PM ET
Categories:  Health Reform , Unions  
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Ezra, perhaps you should consider that unions negotiate a CONTRACT (legally binding), and individual workers don't have a contract for benefits (the employer can change anything about work conditions and benefits with no legal recourse).

I agree that this is unsightly, but because people don't understand that a contract is a contract with the force of law unless both parties agree to amend it.

Recall that the bonus babies among executives HAD to be paid by near-bankrupt banks even though the taxpayers were bailing them out - because a contract is a contract unless set aside in bankruptcy (which neither the government nor the bankers wanted to do).

Posted by: JimPortlandOR | June 10, 2009 2:45 PM | Report abuse

How many people are actually under a specific contract for their wages and benefits? I don't think it is wise to go negative on revenue sources without hard information that they are legitimately bad ideas. This seems like a pretty minor concession in the grand scheme of things to complain about with the health care process.

Posted by: Drew_Miller_Hates_IDs_That_Dont_Allow_Spaces | June 10, 2009 2:49 PM | Report abuse

Doesn't this idea also run afoul of the often-repeated promise not to raise taxes on people making less than $250K?

Posted by: tl_houston | June 10, 2009 3:18 PM | Report abuse

Wow! Talk about taking a bad idea and making it worse. I'm actually okay with taxing benefits, but not if unions are exempt. What kind of crap is that?

Posted by: SteveCA1 | June 10, 2009 3:24 PM | Report abuse

Obviously, Mr. Klein is correct that it would be unfair to exempt unions from the general requirement that excessive health benefits be taxed. Just as obviously, unions are the primary constituent of the Democratic party, a party that Mr. Klein generally agrees with. Unions spent a small fortune electing a Democrat as president and a Democratic majority in both houses of Congress. As the primary constituency of the Democratic party, unions have already been successful at getting the federal government to bankroll GM and Chrysler to the union's benefit, not to mention EFCA and halting the Doha round and previously-negotiated FTAs with allies like Colombia. As such, why should we expect that the special interest treatment of unions will be any different when it comes to health care benefit taxation?

Posted by: Dellis2 | June 10, 2009 3:33 PM | Report abuse

A "bipartisan" solution could be to eliminate the union health insurance tax break in exchange for passing card check. Just sayin'.....

Posted by: tomveiltomveil | June 10, 2009 3:37 PM | Report abuse

My initial reaction to the headline was a one word answer: "no"

....but then again, unions have been exempted from many benefit based laws for there is precedent for this. If not exempted entirely, many benefit laws take effect after the end of the contract period in which the law was passed. This addresses the contract issue JimPortlandOR correctly references

Posted by: scott1959 | June 10, 2009 6:04 PM | Report abuse

Given that the UAW accepted that they would be on the hook for all of the Big Three's health and pension costs and that instead of cash, that they would accept stock as payment, stock that may not be worth the paper it's printed think taxing that would be a good idea?

I have an actually progressive counter-proposal that doesn't involve turning your nose up at one of the main constituencies of the Democratic Party: accept the inclusion of union health care plans under taxation, and then move the entire union movement onto the public plan.

Posted by: StevenAttewell | June 10, 2009 7:53 PM | Report abuse

StevenAttewell raises a good point that counters a point Dellis2 made.

The primary beneficiaries of the GM/Chrysler bailout was not the unions. Stockholders got wiped out, but bondholders (many of whom bout these bonds on the cheap assuming a bailout would occur) did fine.

The UAW got to go through two rounds of cuts, and had their VEBA funding cut and converted to stock. In all likelihood, they just eliminated retiree medical for themselves at some point.

They temporarily keep a job, but not a hell of a deal in my book.

Posted by: scott1959 | June 10, 2009 10:09 PM | Report abuse

JimPortland said, "...unions negotiate a CONTRACT (legally binding)..."

After what has happened to GM, we see that in this country, contracts are made to be broken -- at least by the government! They no longer have the force of law, and themselves are not worth the paper they are written on. The rules can change daily regardless of what 'contracts' may or may not exist.

In light of this, I don't see how the unions can continue to expect special treatment while the burden on their fellow taxpayers continues to increase.

Posted by: ernestine21144 | June 11, 2009 7:38 AM | Report abuse

All contracts go out the window in Chapter 11.

Posted by: scott1959 | June 11, 2009 8:53 AM | Report abuse

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