Major Policy Wins in Federal Spending Bill – Age 21 for Tobacco Purchases, Trio of Onerous Health Care Taxes Repealed
It’s official: A large, varied and expensive spending bill package, estimated at a whopping $1.4 trillion, will keep the government going through September of next year. The U.S. Senate passed the measure (71-23) and it’s now onto President Trump’s desk for signature.
Admittedly, the ever-growing federal deficit, which this makes worse, is a concern – and why Indiana’s junior senator, Mike Braun, voted against it. However, the federal government needs to stay open and several long-standing Indiana Chamber priorities were addressed, making this overall a big victory for business and the state of Indiana.
At the top of the list: raising the legal age for purchasing tobacco and vaping products to 21, as well as permanently eliminating and repealing the medical device tax, the “Cadillac” tax and the health insurance tax (HIT) – all key financing provisions in the Affordable Care Act (ACA). Notably, this tax trio was widely opposed from the onset and gained bipartisan support for permanent repeal early on. Still, it’s taken nearly a decade to see that come to fruition, after various short-term delays in taking effect.
A look at all four major policy wins for the Indiana workforce:
Raising age to purchase tobacco products
“Indiana’s tobacco usage is a big factor why the state’s already bottom 10 national health care rankings continue to decline. Raising the legal age for smoking and vaping from 18 to 21 will have the single biggest impact on curbing usage and eventually leading our state to improved health,” says Indiana Chamber of Commerce President Kevin Brinegar.
“Smoking also costs Hoosier companies over $6 billion annually in lost productivity and annual health care costs for employees. We are especially grateful for Sen. Todd Young’s leadership. He has been a vocal champion of raising the legal age and authored the stand-alone bill that was folded into the spending package. We applaud his tenacity in getting this policy across the finish line.”
Governor Holcomb has said that he plans to still pursue state legislation, noting the federal law – slated to take effect next summer – doesn’t cover possessing tobacco products, just purchasing. The Indiana Chamber will be supportive of that effort and encouraging state lawmakers to implement a tax on vaping products and increase the state’s per pack cigarette tax, which is well below the national average (Check out our recent IBJ column on why the tax should happen now.)
Medical device tax
The 2.3% excise tax on medical devices would have had an especially detrimental impact on Indiana given the high number of good-paying jobs here that are directly associated with these products. This includes major companies like Cook Medical in Bloomington and Zimmer Biomet in Warsaw, along with many others.
“The permanent elimination of the medical device tax is something we have sought since it was introduced in Obamacare,” Brinegar says. “The tax is a job-killer and represents a particularly offensive and counterproductive form of taxation in that it is tied to the volume of production and not the profitability or income related to that production.”
The Chamber also viewed the tax as a hindrance to medical innovation. In addition, it would have driven up the cost of medical care and adversely impacted individuals, often senior citizens, with physical ailments.
“Our congressional delegation – from former Sen. Joe Donnelly to Congresswoman Jackie Walorski (IN-2) – has repeatedly pushed for the permanent repeal to help Indiana’s vital medical device manufacturers. We particularly want to applaud the efforts this year of Sen. Young, Rep. Walorski and Rep. Jim Banks (IN-3),” Brinegar offers.
Cadillac tax
The Cadillac tax, which was also set to take effect in 2020, is a 40% non-deductible tax on the cost of employer-sponsored health care coverage that exceeds federal government thresholds.
The big deal: It would have forced a large number of Indiana employers to either 1) reduce the value of health care coverage they provide to their employees by raising deductibles, co-pays, out-of-pocket maximums and/or premiums, or 2) pay a substantial tax because the health care coverage they provide to their employees has been deemed “too rich”.
“The Cadillac tax would have been a horrible one-two punch for the workforce – both reducing benefits for employees and increasing the cost of business for employers,” explains Mike Ripley, Indiana Chamber vice president of employment law and health care.
Health insurance tax
The health insurance tax (HIT), or provider fee, was slated to be assessed on insurers to help pay for the ACA, but ultimately would have been passed along, in the form of increased premiums, to small businesses, middle-income families, seniors and young workers.
Over a 10-year period, this tax was projected to increase premiums for individual coverage by an average of $2,150 and family coverage by an average of $5,080.
“From the onset, the Indiana Chamber vigorously opposed HIT because of its impact on the small business community,” Ripley offers. “The tax would rest entirely on the insured marketplace, meaning that businesses and their workers would have felt the brunt. By adding taxes onto already increasingly high premiums, there was a real danger of pricing people out of coverage.”
Resource: Bill Waltz at (317) 264-6887 or email: bwaltz@indianachamber.com
