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Another Reasons Unions Should Support Capping the Employer Tax Exclusion

Len Burman had a good piece in the op-ed section today arguing that capping the employer tax exclusion would actually be better for unions, I agree with him. But I'd add one argument he neglects: Union laborers do not stay employed forever. Many of them, in fact, are in industries that have been shedding jobs at an abnormally rapid clip. Just ask the United Auto Workers. Or the Steelworkers. And if that's the case, then it's not necessarily wise policy to entrench a continuous, large subsidy that benefits workers in industries able to provide generous benefits at the expense of the un- and underemployed.

One related point I'd make on this is that there is, in progressive circles, a tendency to confuse the interests of labor unions and the interests of progressivism. The two things often overlap. But they are not, in fact, the same. And that's okay. But this is very much one of those cases. The employer tax exclusion is regressive. It gives employers more power over workers. It reduces choices, fractures the system and increases health-care costs (which in turn decreases wages). Unions are protecting what they have, and that's their right. But protecting the employer-based health-care system, particularly at the expense of a regulated and integrated alternative, is not a terrifically progressive thing to do.

By Ezra Klein  |  July 9, 2009; 5:12 PM ET
Categories:  Health Reform  
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Comments

I understand that the nail in the coffin of the Dem's last attempt at reforming healthcare, 'Hillarycare,' came courtesy of the UAW. The plan was all set to get out of committee, and they had the votes on the House floor, when John Dingell, D-Mich, the committee chairman, who was set to vote for it, got a call from the head of the UAW telling him not to let it come to a vote, as it might hurt the (pick your adjective: generous/lavish) health benefits of UAW members and retirees.

I'm not an expert, nor inside the Beltway, but that's how I recall it went. Plus ca change....

Posted by: johnnysunshine | July 9, 2009 6:42 PM | Report abuse

But protecting the employer-based health-care system, particularly at the expense of a regulated and integrated alternative, is not a terrifically progressive thing to do.

Now would somebody tell Ed Shultz that?

Posted by: markg8 | July 9, 2009 6:53 PM | Report abuse

A good percent of people have periods of unemployment between jobs, want to retire early but there is no retiree health care, retire only to see the retiree health plan eliminated, or would like to leave their current employer to strike out on their own...all of which is made much more difficult due to the way health insurance is provided in this country.

For unions to obstinately refuse to consider a tax cap is to assume that none of these things will ever happen to their members. That is foolish.

Posted by: scott1959 | July 9, 2009 7:05 PM | Report abuse

In some sectors (public sector jobs in particular) unionized employees may earn comparatively low salaries for their field, especially in expensive coastal states. The figures thrown around about what amount of spending would kick in the tax sound like a lot, but a family policy in a state like Massachusetts (where I live) would put many families right near that cap. Such a provision would potentially prove far more costly in some states than in others. The best prospect for necessary revenue in the short run might come from an ungainly combination: something like a tax on health insurance issued form employees starting at a very high level (higher than the figures now mentioned), plus a soda tax, plus a small surcharge on certain high incomes. This would not be elegant but it might get the revenue needed to start.

Posted by: bdlieberman | July 9, 2009 9:24 PM | Report abuse

Ezra you are right to point out that union labor can never be employed at perpetuity. But alas that wisdom does no go into heads of union leaders and their political bosses. The temporal nature of jobs can be very well understood by individual workers; but alas as usual her interests are not necessarily looked after by her masters.

It is 'ideology and power lust' stupid! As expected those take revenge on common folks.

Posted by: umesh409 | July 10, 2009 1:11 AM | Report abuse

While I support eliminating the employer deduction entirely, I laughed out loud at this:

"Union laborers do not stay employed forever. Many of them, in fact, are in industries that have been shedding jobs at an abnormally rapid clip. Just ask the United Auto Workers. Or the Steelworkers."

So...let's have more and more powerful unions, right? Then more industries can start "shedding jobs at an abnormally rapid clip".

Posted by: lfstevens | July 10, 2009 1:13 AM | Report abuse

While I support eliminating the employer deduction entirely, I laughed out loud at this:

"Union laborers do not stay employed forever. Many of them, in fact, are in industries that have been shedding jobs at an abnormally rapid clip. Just ask the United Auto Workers. Or the Steelworkers."

So...let's have more and more powerful unions, right? Then more industries can start "shedding jobs at an abnormally rapid clip".

Posted by: lfstevens | July 10, 2009 1:21 AM | Report abuse

Ezra,
Please read my post at www.gooznews.com/node/2992 and refute it if you think taxing benefits is such a great idea. I have no problem with people advancing support for the idea of taxing benefits as Burman did, but his piece, in attacking unions, failed to address even a single of the objections. At least Jonathan Gruber in last week's New England Journal of Medicine had the intellectual honest to address the serious problems with taxing benefits. I refuted his proposed solutions one by one in my piece. But Burman didn't even talk about the objections. It was a hatchet job, plain and simple, and that you have endorsed it does not speak very highly of your analytical skills.

Just one point: why go after unions, and the UAW and Steelworkers in particular. The private sector workforce is now just 8 percent unionized. Those two unions combined probably represent fewer than half million under 65 people even including their family members. The vast majority of people hit by a benefits tax would be people in high cost areas like NY and California, people with older and sicker workforces and people who work for small employers and in all of those classes, it would hit rich and poor alike (albeit in a "progressive" fashion).

All in all, it is about as unprogressive a tax imaginable given the alternatives now being talked about on the Hill.

Posted by: GoozNews | July 10, 2009 7:29 AM | Report abuse

The other problem, of course, is that people love the "employer tax exclusion" or, as they think of it "affordable health insurance."

If you take that away, millions of Americans will face what feels like a massive hike in health costs. Not just rich ones, not just union members. Sick ones, actually. Old ones, too.

This is why the genius of the Wyden plan is that he GIVES YOU THE ACTUARIAL VALUE OF YOUR PLAN IN CASH.

I'm sorry, but unless you give people a big pile of money, they will be very upset that you took away their free health insurance. And no, they don't think of it as foregone wages. Because, for one, they don't have the foggiest notion how much it costs.

Sorry, but the way you shift people off the employer based system isn't by making health insurance MORE unaffordable for people who work. You will never be forgiven for this.

Posted by: theorajones1 | July 12, 2009 6:34 PM | Report abuse

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