As part of the continuing discussions about health care reform, the spectre of how to pay for it has risen again. Yeah, cause that’s how it apparently works in Congress. Much like college students, the plan is to figure out how to pay for all the binge-spending “later.”
So, with that in mind, consider this: Senate Majority Leader Harry Reid (D-NV) is seeking yet another source of funding for health care reform. This one would raise Medicare payroll taxes on couples who make more than $250,000 a year. Yep, these are the same folks that are likely getting hit with an increase in regular ol’ income taxes to pay for health care reform.
Reportedly, the increase would make up for concessions being made with respect to those Cadillac plans. If you believe the chatter, those thresholds may increase – to $8,500 for individuals and $23,000 for couples. The resulting gap will be narrowed by those increased Medicare payroll taxes.
The proposal isn’t much in terms of dollars. It would simply raise the payroll tax to 1.75% from 1.45% for individuals earning more than $200,000 a year and couples making more than $250,000. Popular for the middle class, sure, and for unions who have opposed the Cadillac tax plans.
But not so popular with high dollar wage earners who feel as though they’re being looked at to pay for, well, everything. Need a dollar? Jack up taxes on the wealthy. It’s just so easy.
But maybe – and I’m just throwing it out there – there’s not an endless pool of money out there. Maybe exerting pressure at every turn on high wage earners to make up the difference could have unintended consequences. John Goodman (not the actor who plays Roseanne’s husband but President of National Center for Policy Analysis) claims that the extra Medicare tax “takes money out of the system needed to create jobs.”
That’s not something to be taken lightly in this economy. And the GOP knows it. All of the Republicans in the Senate are opposed to the bill. To push it through and put the kibosh on Sen. Joseph Lieberman (I-CT), Sen. Reid needs the okay from everyone else. Everyone. I’m not sure he’ll get it. Just doing a little bit of math here… But Lieberman kind of counts as one of those “everyone else”, right?
Are we one step closer to health care reform? The Senate Finance Committee sure gave that impression by putting forth a $829 billion health care bill today. The bill passed in committee by a vote of 14-9 with Sen. Olympia Snowe (R-ME) representing the lone committee member to not vote along party lines.
What does the vote mean? Nothing concrete – don’t get excited. It just means that the matter will go to the full Congress for debate. I wouldn’t expect that to be easy.
This version would be financed by reductions in spending for Medicare and other government programs (about $400 billion); new fees on the health industry; and taxes on the so-called “Cadillace” insurance plans (about $200 billion).
The latter is not expected to make it through the full House without significant changes. Notably, unions, which tend to support Democratic candidates, are insisting that the taxes be dropped. House Democrats may, instead, favor a surtax on high earning taxpayers (individuals with incomes of more than $500,000 or families with combined incomes of $1 million or more). Republicans are opposed to the surtax.
Notwithstanding that the Democrats have a majority in Congress and a limited amount of crossover support, don’t expect a vote any time soon. There are still many details to work out, including how to pay for the bill and whether to incorporate a public option.
Hold on, it should be an interesting ride this fall!
Don’t call it the Obama health care tax.
On Sunday, Health and Human Services Secretary Kathleen Sebelius clarified on CNN’s State of the Union that the proposal being considered in Congress to tax employer provided health care benefits was not endorsed by her boss. Obama had opposed such a tax during his candidacy; his opponent, Sen. John McCain had supported the plan.
But now that a similar plan is making its way through Congress, the White House wants taxpayers to understand that he’s not a fan of the proposal. No wonder since several recent surveys show an overwhelmingly opposition to taxing benefits. Sebelius did not, however, refer to the plan as a “deal breaker” leaving the door open for an Obama endorsement if Congress can’t come up with something better.
Obama favors a cap on tax exemptions for those making more than $250,000 per year. This is the same plan that he proposed months ago – a plan which Sen. Max Baucus (D-MT) then opposed, questioning whether the plan would work.
It’s no surprise that the GOP joined with Dems in rejecting Obama’s proposal even though the Obama administration tried to play the “Reagan card” by pointing out that the caps would bring limits back to the Reagan years. The GOP opposes any cap on exemptions and instead, as blogged earlier, proposes a new tax on the benefits of the most expensive employer-provided health insurance plans, the so-called Cadillac plans. Sen. Lamar Alexander (R-TN) is one of the most vocal supporters of tweaking tax benefits for Cadillac plans, possibly in conjunction with a plan that would give employees cash to buy their own private insurance.
So let me sum up… The GOP said yes to taxing health care benefits in fall, and the Dems said no. Then the Dems said yes – and no – while several key members of the GOP said no. Obama keeps saying no – but not “deal-maker” no. And the GOP decides to go back to the plan from earlier.
Anyone getting the real sense, as Sen. Judd Gregg (R-NH) that the chances of passing a health care reform bill before the August break are “very unlikely”? Hands up… Yeah, that’s what I thought.
