New Study Shows Virtually All Manufacturers Impacted by Tax on Employee Benefits

NAM Study Highlights Economic Impact of Tax

Washington, D.C., December 8, 2015 – The National Association of Manufacturers (NAM) released a new study today, titled Heads Up: A Tax on Employee Benefits Is Coming Your Way. The Affordable Care Act (ACA) implemented a 40 percent tax on employee health care benefits that is set to go into effect in January 2018. This study takes a look at the economic impact of this tax under several scenarios and finds that while the tax is intended to target high-end insurance plans, it will hit the middle class as well as employers across the board.

“Manufacturers have always provided generous health care benefits to their employees—in fact, at least 97 percent were doing so before enactment of the ACA. Our desire to do so is steadfast,” said NAM President and CEO Jay Timmons. “However, this tax is just one more example of how Washington has failed workers. It will significantly add to the cost of manufacturing in America, making it far more difficult for manufacturers to continue to provide benefits when they must compete with manufacturers overseas. Health care costs and regulations are already a top concern for manufacturers; this tax makes the situation worse. This study shows just how many middle-class families and manufacturers are going to be hurt by this tax, and it is time for our lawmakers to repeal it.”

“American manufacturers work hard to ensure our employees are fairly compensated and receive the best benefits we can offer,” said Snap-on Incorporated Chairman and CEO and NAM Tax and Domestic Economic Policy Vice Chair Nick Pinchuk. “Why would Washington want to make it harder for companies, particularly manufacturers, to support their employees? This tax is the wrong approach and counterproductive. Our elected representatives should protect health care, jobs and economic growth. American manufacturers are looking to them to do just that and solve this problem.”

The tax, also known as the “Cadillac tax,” will have the following impacts:

  • The accelerating nature of the tax will prompt many employers to continually increase cost sharing and/or eliminate benefits. On-site clinics, on-site pharmacies, wellness programs, flexible spending accounts and health savings accounts could all be in jeopardy.
  • If health insurance premium prices increase moderately, the tax would hit between almost 30 percent of manufacturers’ plans by 2025 and more than 80 percent by 2035. If they increase at a higher rate, the employee benefits tax would affect 60 percent of plans in the manufacturing sector by 2025 and virtually all plans by 2035.
  • Virtually all employers would end up facing the tax at some point.
  • Job losses from the tax could total 2.6 million by 2035, and real personal income in 2014 dollars would be reduced by almost $3,800 per household.
  • The economic tax burden would reduce GDP by 1.7 percent by 2035.

Earlier this year, the NAM released a poll that showed a majority of Americans oppose the tax, and just last week, 90 senators voted to repeal the tax. With virtually every manufacturer being impacted by this tax, now is the time for solutions.

 

To read the full study, visit our website www.nam.org/ebt.


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The National Association of Manufacturers (NAM) is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12 million men and women, contributes $2.09 trillion to the U.S. economy annually, has the largest economic impact of any major sector and accounts for more than three-quarters of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the Manufacturers or to follow us on Shopfloor, Twitter and Facebook, please visit www.nam.org.

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