Obamacare Tax Threatens to Close West Coast Ports

Damian Dovarganes/AP
Damian Dovarganes/AP

The slow-roll implementation of Obamacare threatens to close U.S. commercial ports on the West Coast. The 29 ports, which handle 70 percent of maritime imports from Asia, were closed over the weekend after months of contentious contract negotiations. The ports reopened Monday, but 20,000 longshoremen are still threatening to strike over a new Obamacare tax.

Obamacare imposes a 40 percent tax on health benefits deemed too generous by the government. Health benefits exceeding $10,200 a year in value for individuals or $27,500 for families are defined as “Cadillac” plans and are subject to the tax. Health benefits for longshoremen exceed $40,000 per employee, meaning the union would be served an enormous tax bill when the penalty is imposed in 2018.

The longshoremen’s contract expired in July, 2014 and contract talks have stalled, in large part, over whether workers or employers will pay the new Obamacare tax. The longshoremen are the first union to negotiate a contract that would extend beyond the time the tax is first imposed.

“This will come up in just about every contract negotiation out there,” J.D. Piro, a health-benefits consultant, told Bloomberg News. “Every employer is going to be calculating when and if they hit the threshold and how they’re going to pay for this.”

The full ramifications of the new “Cadillac” health care tax won’t be felt until 2018, two years after the next presidential election. Obamacare was constructed in a deliberate manner, front-loading the “benefits” of the law and pushing implementation of its “costs” far into the future, usually after critical elections.

The emerging debate over the new “Cadillac” tax is likely to spark numerous unintended consequences.

The International Longshore and Warehouse Union has warned about the impact of Obamacare since Democrats first pushed the law through Congress. In 2013, the iconic union quit the AFL-CIO, citing the association’s failure to oppose the tax as a reason for the disassociation.

The longshoremen last went on strike in 2002, causing a shutdown of West Coast ports that cost the economy more than $2 billion a day in lost output. The strike ended when the Bush Administration went to court, reopening the ports under the Taft-Hartley Act.

The current impasse over the Obamacare tax overwhelms all other items under negotiation between the union and port management. Current health benefits for employees and their families already cost ports $1.6 million a day. If employers have to absorb the higher costs of the tax, there will be less flexibility for other parts of the contract.

Obamacare was passed by Congress almost five years ago. The nation is still three years away from its full implementation. As the drama over the West Coast ports shows, the full economic consequences haven’t even begun.


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