Labor's $60 Billion Payoff

A health tax that hits everyone except the Democratic base.

Democrats seem impervious to embarrassment as they buy votes for ObamaCare, but their latest move makes even Nebraska's Ben Nelson look cheap: The 87% of Americans who don't belong to a union will now foot the bill for a $60 billion giveaway to those who do.

The Senate bill was financed in part by a 40% excise tax on high-cost insurance coverage. The White House backs this "Cadillac tax" as one of the few remaining cost-control tokens. But Big Labor abhors the tax because union benefits tend to be far more generous than average, and labor leaders and House Democrats have been throwing a political tantrum for weeks.

So emerging from their backrooms, Democrats have agreed to extend a special exemption from the Cadillac tax to any health plan that is part of a collective-bargaining agreement, plus state and local workers, many of whom are unionized. Everyone else with a higher-end plan will start to be taxed in 2013, but union members will get a free pass until 2018.

Ponder that one for a moment. Two workers who are identical in every respect—wages, job, health plan—will be treated differently by the tax system, based solely on union membership.

Richard Trumka of the AFL-CIO says this and other concessions mean the excise tax will raise some $60 billion less than the original Senate version. Democrats are probably going to charge investors for this political perk, by extending the 2.9% Medicare payroll tax to capital gains for the first time ever—on top of all the other taxes. Just what the economic recovery needs.

Meanwhile, the extra five-year dispensation gives labor lobbyists plenty of time to negotiate a permanent extension for the Democratic union base, even as labor is being armed with an important new organizational tool: Eliminating the secret ballot in union elections might be unnecessary when unions have an exclusive tax privilege at their political disposal. Right-to-work states will also be punished because they are less unionized.

The payoff shows that no one is doing a better job of rebutting the White House's technocratic cost-control claims than its own party. How exactly is the excise tax going to drive down premiums when a good part of the most expensive plans is exempted? The new union deal follows a similar one with Harry Reid that exempted the 17 states in which health costs are highest, plus longshoremen, construction workers, some farmers and sundry other liberal allies.

Amid the Beltway panic over Tuesday's special Senate election in Massachusetts and deepening public revulsion about sweetheart deals like Mr. Nelson's "Cornhusker kickback," it's more than a little surprising that the White House would be so tone-deaf to even contemplate a demand that is so contrary to basic fairness. But somehow Democrats have convinced themselves that the only tourniquet that will stop the political bleeding is to pass a bill that even President Obama admitted on Thursday is deeply unpopular.

Democrats wouldn't have to pay these partisan bribes had they chosen to write a less radical bill that could attract Republican votes. But then they would have had to pass something other than this destructive and unaffordable exercise in entitlement politics.