Healthcare, Cadillacs & taxation options

Alright, everybody sing along to the new hit from Congress, set to Dwight Yoakam's "Guitars, Cadillacs and Hillbilly Music."

As Congress struggles to come up with ways to pay for healthcare reform, some members are again pushing the taxation of insurance companies that offer high-cost, gold-plated healthcare plans, or as it's popularly known, "Cadillac" coverage.

The Wonk Room cites Kaiser Family Foundation data that shows the average family pays approximately $13,000 for health coverage, 9 percent of workers have family coverage with premiums of $17,000 or more and the top-line "Cadillac" coverage of $25,000 or more is available to less than one percent

The proposal now being examined would levy a tax on both the employer and the insurance company offering the coverage. Supporters of the tax see it as a win-win: It would raise new money to pay for healthcare reform and discourage companies from offering plans that many see as offering "overly generous" benefits.

The taxing of high-dollar plans came up early in the Senate Finance Committee's discussions of ways to raise healthcare money. It got a boost last week when the Administration acknowledged it was open to a closer examination of high-cost plan taxes.

Fattening food tax back in play: Also gaining taxation traction is a fatty foods tax. This, too, is an area that early on was atop the healthcare tax lists (details in my post The wages of sin is health care).

Kaiser Health News points to a study released Monday by the Urban Institute and the University of Virginia that found "a 10% excise or sales tax on fattening foods could raise $522 billion over the next 10 years. A 20% tax could raise $937 billion. Among its other uses (like paying down the deficit), that money could be used to defray the costs of health care reform or to curb the rise in obesity."

No one questions the health costs of being overweight. But it's going to take a lot more than just a spoonful of sugar to make this tax palatable, especially with some of the big D.C. lobbyists weighing in on the debate.

Americans Against Food Taxes, a coalition of industry organizations that includes the National Restaurant Association, the American Beverage Association and the National Grocers Association, as well as some individual companies, argues that such specific food taxes are regressive.

Poorer people spend a larger percentage of their smaller incomes on food. And a lot of that food is of the high-calorie, lower-cost variety. These folks also are typically among the uninsured.

So while there's a definite connection, I suspect that making the people who need health coverage pay more in taxes to get it is exactly what Obama and healthcare reformers had in mind when they started this process.

Good food, bad food: Then there's the matter of defining exactly which foods and beverages are "unhealthy."  I used to work for Nestlé, the world's largest food company. As you might suspect, the company and its competitors are against food taxes period, and ever before I started getting a paycheck there, I agree. Food is a basic human need. It shouldn't be taxed.

Of course, not everyone agrees. Some food is junk food and if we can't convince people to give it up, we should, in part, tax it into oblivion. That led to a mantra at my former employer and its colleague/competitor companies: "There is no 'bad' food."

I didn't necessarily agree with that in my years with Nestlé. The food giant's powers that be obviously hadn't tasted some of the comestibles I had. But the point that it's hard to nail down just what is "bad" and by what degree is well made.

Plus, I personally know how persuasive, both intellectually and campaign contribution-wise, the food front in D.C. can be.

So look for the food, fat, sugar, whatever you want to call it tax to be a tough sell.

And with time running out, at least from the president's perspective, and revenue raising ideas — like the cosmetic surgery excise tax that I blogged about earlier today and from which Senators are now reportedly (per Tax Analysts; subscription required) distancing themselves — scarce, expect lawmakers to keep coming up with "creative" ways to pay for healthcare reform.

Have you got any suggested taxes that could pay for revamping our healthcare system? Let me and other Don't Mess With Taxes readers know by leaving a comment.

1959 Caddy tailfins photo courtesy Rennett Stowe/Flickr

Related posts:

• Cosmetic surgery tax talk
• The wages of sin is health care
• Still shifting healthcare surtax sands
• Tax those tacky ads to pay for health care