Promises worth breaking: Obama's health insurance tax didn't go far enough.

• Author: Sullum, Jacob

THE PRESIDENT'S proposed tax on especially expensive medical benefits broke at least three of his promises. It still may have been the best aspect of a health care plan that foundered when the Democrats lost a crucial Senate seat in January.

As approved by the Senate, the 40 percent excise tax would have applied to medical coverage costs above $8,500 a year for individuals and $23,000 for families. Although those cutoffs are far above average, they would have risen more slowly than insurance premiums, and the Joint Committee on Taxation (JCT) estimated the tax would affect nearly a quarter of Americans with employer-provided coverage by 2019.

This bracket creep was a feature, not a bug, because the aim was to reduce the incentive that encourages employers to provide tax-free medical benefits instead of higher wages. The more people are covered through work, and the more generous their coverage, the more they are insulated from the costs of their health care choices, a situation that impedes competition and inflates costs.

Barack Obama's excise tax would nibble at the edges of this problem by encouraging employers to cut back on the most expensive health plans and shift the money they save to wages. In fact, the JCT projected that more than 80 percent of the money raised through this provision during its first decade would come not from the levy itself but from taxes on higher wages.

Which brings us to those broken promises. While running for president Obama repeatedly vowed not to raise taxes on families earning less than $250,000 a year. Yet the JCT'S numbers indicated that most of the money raised by the tax would come from households in that income group.

Last year Obama repeatedly assured the public that his health care plan would not affect people who are happy with their current coverage. "No matter how we reform health care," he said in a June speech, "we will keep this promise: If you like your doctor, you will be able to keep your doctor. Period. If you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what."

Yet the premise of the excise tax on "Cadillac" medical benefits is that some employer-provided plans, because...