Bruce Yandle’s “Baptists and bootleggers” analogy often provides a good way to look at policy questions. With unions fighting the Obama administration over a tax on high-value insurance plans, the “Cadillac Tax,” this might be a good time to figure out who’s who in the debate.
On the pro-tax side are “Baptists” Jonathan Gruber, who says it is not really a tax because it just removes an exemption, and the CBO, which sees most of the money from the tax coming from higher incomes as companies drop coverage or switch to lower value plans. They are teamed with “bootleggers” in Congress and the White House who are looking for ways to fund their Leviathan dreams. Any corporate and popular response to the tax would likely be against the insurance companies and for an explicit government option.
Against the cuts are the “bootlegger” union bosses who try to pose as their “Baptist” middle-class members. If the tax goes through, the unions lose a significant lever in collective bargaining sessions. Now they can sacrifice some pay for nominally better benefits while recognizing both are aspects of total compensation. That is the tactic they have used in the past and what has led to the high-value, low-deductible plans subject to the new tax. If they can’t secure better benefits for employees, what good are unions?
Insurance companies either pay the tax and pass the cost along or they sell new policies to companies that may have less actuarial value but avoid the extra cost. They and large unionized companies would likely be against the excise tax because of the potential for backlash, and may fill the bootlegger role, too, but are more ambivalently effected than unions. If a company reduces the cost of insurance, avoids a tax, and passes along the savings to employees, management may not look as bad to labor.
