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Obama Willing to Consider Tax on Employer-Paid Health Benefits

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President Obama says changes to the nation's health systems are necessary and the window for overhaul will close when Congress breaks for summer vacation. (Video by the Associated Press.)

Updated 7:58 p.m.
By Michael D. Shear and Ceci Connolly
President Obama, in a pivot from some of his harshest campaign rhetoric, told Democratic senators yesterday that he is willing to consider taxing employer-sponsored health benefits to help pay for a broad expansion of coverage.

Senate Finance Committee Chairman Max Baucus (D-Mont.) said Obama expressed a willingness to consider changing the existing tax exclusion. The decision would probably anger liberal supporters such as labor unions, but such a tax change would raise enormous sums of money as Congress and the White House are struggling to find the estimated $1.2 trillion needed to pay for health-care reform over the next decade.

"Yeah, it's something that he might consider," Baucus told reporters after the meeting between Obama and Democratic lawmakers. "That was discussed. It's on the table." Obama had summoned about two dozen senators to the White House to keep up the pressure to enact a comprehensive health-care overhaul this year.

White House officials moved quickly to clarify that taxing the health insurance provided by businesses is not Obama's first choice, but aides refused to rule out the possibility.

"The president made it clear during the campaign that he has serious concerns about taxing health-care benefits, and he has introduced his own revenue proposal, which he reiterated in today's meeting," spokesman Reid Cherlin said.

Obama instead urged senators to reconsider his proposal, which would raise federal revenue by reducing itemized deductions such as charitable contributions and mortgage payments for the wealthiest Americans, according to one adviser in the meeting. Obama included that idea in his budget, reporting that it would raise $317 billion over 10 years, a sizable "down payment" on the cost of health-care reform. But Congress immediately labeled the proposal a non-starter.

Private-sector businesses spend about $518 billion a year on their workers' health insurance, benefits that are not taxed. If workers had to pay taxes on their health coverage, it would raise $246 billion in revenue each year, according to the congressional Joint Committee on Taxation.

Tax treatment of employer-sponsored health care cuts across party lines: Prominent Republicans such as Sen. Judd Gregg (N.H.) support imposing a tax on certain health plans, while Democrats such as Sen. Sherrod Brown (Ohio) say that a tax would unfairly hurt middle-class workers with good benefits.

Health analysts from across the political spectrum have pressed for changing the tax treatment, arguing in part that the exclusion provides the greatest tax relief to high-salaried workers with generous insurance plans.

Last month, Baucus said he did not support eliminating the exclusion but was eyeing a benefit cap. Experts have outlined two likely approaches: taxing health benefits for workers above a certain income level; or taxing benefits over a certain value, perhaps $14,000 a year.

Administration officials meeting with lobbyists in recent days have projected that a benefit cap might generate $35 billion a year, though Finance Committee staff said the number could be much higher.

Nevertheless, the issue represents treacherous politics for Obama, given his attacks on Sen. John McCain (R-Ariz.), who advocated a similar approach during the campaign.

"For the first time in American history, he wants to tax your health benefits," Obama said in September. "Apparently, Senator McCain doesn't think it's enough that your health premiums have doubled. He thinks you should have to pay taxes on them, too."

Strongly desiring to declare a health-care victory this year, Obama is now taking a more nuanced approach, aides said. "His style of leadership is to say, let's not get bogged down; let's keep moving forward," said one senior adviser who was in yesterday's meeting. "He's not ruling anybody's ideas out."

Staff writer Michael D. Shear and staff researcher Madonna Lebling contributed to this report.

Posted at 3:53 PM ET on Jun 2, 2009  | Category:  Video Report
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This points to difference from the kind of rhetoric and demagoguery routinely practiced in campaigns and how sound policies are attacked with those campaign practices. Things like changing the tax status of health benefits or mandating that people buy insurance are ripe for exploitation by candidates because the mass of the population is simply ignorant about the fundamental workings and problems of the system. Yet as noted, "health analysts from across the political spectrum" who are the opposite of ignorant support such things.

Which brings me to the role the news media chooses to play. The easy story is about the politics of health care. It's much more difficult to explain concepts that are important but not obvious to the average person, yet that are almost universally understood by experts and which are necessary for making any educated judgment about health care reform.

Posted by: jskdn | June 5, 2009 12:44 PM

....Well, maybe they will make a show of taxing Congress' healthcare benefits, too, but giving themselves a nice RAISE to cover it

...& pass it LATE on a Friday night so it never makes news.

Posted by: jojopea | June 4, 2009 1:18 AM

'Scuse me, but will this include taxing Congress' healthcare benefits or not?

My guess is NOT. ;)

Posted by: jojopea | June 4, 2009 1:14 AM

How about a tax on Kool-Ade?

Posted by: eldergent | June 3, 2009 1:54 PM

More of the same...

wait a minute...

when did McCain get in office? WTH? What is this headline I'm reading...sounds like...Obama's turning into McCain.

Hahahah, so much for CHANGE.

Posted by: prsntNacctd4 | June 3, 2009 9:42 AM

Howard Dean is correct.

"a"(Toothy, Robust)"public health insurance option is more important than bipartisanship, and Democrats should pass health-care legislation that includes the option with 51 votes if necessary."

"Democrats should have "no intention" of working with Republicans if it's not the strongest possible legislation that could be passed with a simple majority." (Howard Dean)

This is what WE THE PEOPLE gave the Democrats all that power to do for ALL of us.

You see, Dr. Dean knows that in medicine and healthcare there is only one acceptable standard. And that standard is the HIGHEST level of EXCELLENCE you can provide for everyone. Nothing less has ever been acceptable in caring for a precious human life.

And the White House is right too. "Good health care reform is essentially good economic policy." (Christina Romer)

jacksmith -- WORKING CLASS

Posted by: JackSmith1 | June 3, 2009 4:14 AM

Kudos to those who understand that when a significant problem needs to be resolved-- there's something called a 'brain-storm'. Throwing out ideas to see which may/can work. The president dispite shortcomings, is smart and on top of what's relevant and possible, politically.

President Obama is in office less than six months, and I am willing to give him time to put together a coherent plan that is likely to work. Consequently, he must get that conversation going. Its working! Health care reform is back on the agenda.
http://www.youtube.com/watch?v=K0l2OS04K-A

Posted by: Victoria5 | June 3, 2009 1:05 AM

Invoice Mexico for the cost of health care for illegal immigrants. 10% of the Mexican population is in the USA. So, as Mexico is so fond of sending its people to the USA, the USA should bill Mexico for border enforcement, law enforcement, health care costs, educational costs, and public health costs for the Mexican Swine Flu.

Posted by: zap065 | June 3, 2009 12:26 AM

"Most of the (right winger) posters apparently did not bother reading and comprehending the article. This is not something that Obama is pushing, nor something that has been decided, and no details are mentioned."

Don't be a putz. This is what's known as a "trial balloon." He's thinking of changing his position but he knows it's politicaly risky. If this gets a lot of flack -- even in places like here -- you'll never hear the idea again and no harm done. If it gets a neutral or positive reaction, it may well become policy.

Every one who doesn't like this idea should scream loud and scream now!

Posted by: anon99 | June 2, 2009 9:43 PM

How about going after the greedy HMO's, hospitals, and doctors who need two jags in the driveway.

You lied to us Obama. Change we can believe in, well it looks like it's true, I belive you are changing......everything you promised us is changing to dirt.

Posted by: jb1111 | June 2, 2009 9:17 PM

Yes - by all means - tax the people that already pay a ridiculous amount for lousy coverage so that illegal immigrants can continue getting free health care coverage. Make damn sure that federal employees and all government employees in general are charged tax on the full value of their premo health insurance policies too! Because of the politically entrenched status quo - there is no creativity possible on health care (or anything else)! Morons!!

Posted by: putzel | June 2, 2009 8:45 PM

Raise the cost of labor--great move.

Less jobs, more people on the dole

--would this include federal employees too?

Posted by: ZippyinAnnapolis | June 2, 2009 8:43 PM

What we have here folks is a classic case of the "dog chasing the car." Now that he's caught it, what's he going to do?

We have a 31 year-old Yale Law School Graduate, who has never been inside a factory or studied econimics, running a Automotive task force.

We have a 40-something, running the Treasury, printing money like it's going out of style.

The bullies have taken over the schoolyard folks and for the most part, we're stuck with them until they graduate in '12.

McLame was a jerk, Huckabee is too nice a guy, Mitt Romney knows government and business and my choice, Fred Thompson is a crackerjack lawyer, both off and on TV.

Mr. Cool ain't so hot with the people since King Obama has:

1. Thrown out the bankruptcy code.
2. Put the screws a teachers, police and fire firefghters pension fund.
3. Wants to tax a "fringe benefit."
4. Needs to keep promises, but the price of oil keeps rising.

I say, let's send them a message on July 4th - TEA PARTY

Posted by: Computer_Forensics_Expert_Computer_Expert_Witness | June 2, 2009 8:33 PM

well, well, well.

i distinctly remember negative ads run by obama that distorted mccain's health care tax, so it looks like another round of demogaugery followed by a flip-flop, just like gitmo, getting long term government spending under control, and being honest with the american people as opposed to putting forth rosy scenarios such as he did in his proposed budget when he claimed the economy would grow this year (jusstt a bit outside!).

Posted by: dummypants | June 2, 2009 8:22 PM

Say one thing to get yourself elected, and then without a bit of hesitation, switch to the opposite or what you supposedly abhorred originally. So was he lieing then or is he just pandering now? I don't know how anyone can honestly say he has accomplished a whole lot of what he has promised but certainly at the top of the list is his changing his positions which I am sure must really tick off the diehard koolaid drinkers who can't stand anything negative said about him no matter what.

Posted by: justmyvoice | June 2, 2009 8:11 PM

A much superior idea and therefore less likely to be adopted is to take all the monies employers pay for health care and put the nation on a single payer system.

Posted by: Maddogg | June 2, 2009 8:11 PM

Most of the (right winger) posters apparently did not bother reading and comprehending the article. This is not something that Obama is pushing, nor something that has been decided, and no details are mentioned. Amazing how these people then *know* that this is going to lead to massive tax increases for most people. Guess they have been watching too much Faux News or reading too many RNC talking points. What rubbish! You guys look like fools when you are so obviously divorced from reality.

Posted by: ncarver1 | June 2, 2009 8:10 PM

I'm still waiting for my new AMTruck from Government Motors........................???

Posted by: thgirbla | June 2, 2009 8:09 PM

Obama is pushing for a second term, but in the process is running the country down. When the little tax cut just given expires and they tax health care benefits it will amount to a whopping tax increase....largest of the last 100 years. And the only ones that will benefit will be the illegal aliens.

Posted by: Maddogg | June 2, 2009 8:07 PM

DriveByPoster wrote:
"the tall skinny one has great oratory skills.. but not a whole heck of a lot going on between those big ole ears of his."

Your clueless accusation sound likes the same kind of GOP racist thug buffoonery that questions the intelligence of soon-to-be Supreme Court Justice Sonia Sotomayor. In the president's case, you have a man who not only is a graduate of arguably the best law school in the land but a former editor of that school's law journal and a former constitutional law professor. In the case of Sotomayor, you have the top student in her class at Princeton, a Yale law school graduate, a former asst district attorney, former US District Court judge and current US appellate court judge.

It is blowhards like you who are driving sensible Republicans away from your party in droves. All I can say is keep up the good work.

Posted by: rukidding1 | June 2, 2009 7:54 PM

Taxing health benefits is the worst idea of all. By taxing employer benefits, employers are going to dump health care benefits. The employees will then have to rely on lesser quality Federal care, which will be funded by fewer and fewer tax dollars.

Eventually, all Americans will be on Federal health care and no employers will pay the tax, so the government will have effectively killed private health insurance and have no way to pay for its replacement.

Posted by: AxelDC | June 2, 2009 7:50 PM


gee. it's turning out that the "chosen one" doesn't seem to have a friggin CLUE what he is doing in office.

why am i not suprised?

the tall skinny one has great oratory skills.. but not a whole heck of a lot going on between those big ole ears of his.

@(oo)@

obama says, "what?"

nothing obama... go back to sleep.

Posted by: DriveByPoster | June 2, 2009 7:37 PM

Here's a comment for all you people that voted for this phoney thug- you should be the only ones who have your benefits taxed and you should be the only ones who should suffer with government health care. You loved the guy despite his rhetorical bs, now you should suffer for YOUR stupidity. Furthermore, all those bas*ards who sit on their throned in DC and determine how our lives are run and how much money they can steal from us , should lose their healthcare, retirement and other perks, and suffer the same fate the rest of us will. These punks are OUR servants, not the other way around. How dare they sit there like some kind of royalty and screw with our lives every day! Each and every one of them needs to get gone and find a real job!

Posted by: yankee11 | June 2, 2009 7:30 PM

Obama will show he is just another politician who says one thing to win, then does the opposite when elected, if he reverses himself on the important issue of taxing employer provided health care benefits. Hardly change people can believe in.


Posted by: Aprogressiveindependent | June 2, 2009 7:30 PM

Obama is a co-opter. I believe this is the same approach McCain proposed. And Obama used it to defeat him. Now it is ok. Hmm. And he has co-opted just about every Bush anti-terrorist surveillance method. Now he finds out that he supported the Real ID ACT of 2005 and cannot close Gitmo. Real intellect.

Posted by: gsms69 | June 2, 2009 7:24 PM

Another campaign pledge broken by the President. If I thought the solution to the health care crisis was to tax private health benefits I would have voted for McCain; that was the basis for his health care plan. Taxing private health benefits is unfair, misguided and will only make the health care crisis and the economy worse. The President is being influenced by Mr. Baucus who is owned by the health insurance lobby and will oppose the only true solution, a single payer system, at all costs.

The old saying applies “Fool me once shame on you, fool me twice shame on me”. Many independents like me will be voting by that very principle in the next election.

Posted by: OutForJustice | June 2, 2009 7:23 PM

Taxing private benefits will drive availability down and make more dependent on the government, which is exactly the goal.

Posted by: edbyronadams | June 2, 2009 7:23 PM

I guess he forgot to watch those commericals that were plastered all over the TV last fall.

It's not a bad idea, but given how hard he campaigned against this I think it's a travesty.

Posted by: RedBird27 | June 2, 2009 7:21 PM

Politicians ultimately reflect the public will. As long as individuals are lucky enough to have at least some health coverage and perceive themselves to be healthy (at least in the short term), they will not want to subsidize care for others and we will have a hard time arriving at any middle ground. In addition to a lack of political will, entrenched corporate interests will be nearly impossible to overcome without an overhaul of our entire health care delivery system, in my opinion.

Some sort of single payer system that treats medical care as a utility (like electricity or water) is the only solution that cuts to the chase and provides the most care for the most people. The pressure will only increase as our population ages and the demand for life-saving and life-enhancing care is ever greater. But good luck selling it.

In a sense, we are victims of our own success --- we have access to unparalleled medical technology for at least some of us and it has created unrealistic expectations for everyone. We are addicted to easy choices, but I don't see any.

Posted by: RalphWarnock | June 2, 2009 7:11 PM

It's not policy yet, everyone. Take a breath and wait to see what happens. And, hey, call your senator and/ or congressperson. Don't forget: They work for YOU, not the PRESIDENT.

Posted by: lcbullock | June 2, 2009 7:09 PM

Wow. Very cynical. Imposing such a tax will just cause companies to eliminate health coverage, thereby increasing the "demand" for nationalized health care.

I'm also curious if this new tax will extend to union health vare trusts. Wanna bet not?

Posted by: anon99 | June 2, 2009 7:01 PM

Just spreading the wealth Bro ???

Ya know whut I's mean???

Ya know whut I's sayin ???

Posted by: thgirbla | June 2, 2009 6:57 PM

Yep he promised that if you made less than 200,000 you might even get a tax break. Remember him ridiculing Joe the Plumber, telling us how dumb Joe was.

Joe doesn't look so stupid anymore.

Obama is just redefining what rich is. It was 200,000 per year when he came into office, now it is IF YOU HAVE A JOB, PAY UP SUCKER.

So many people don't have jobs it is you patriotic duty to pay at least 50% of your minimum wage paycheck to Obama Nation, he knows how to spend it better than you.

Posted by: kl305 | June 2, 2009 6:54 PM

What HASN"T Obama "shifted" on? BTW if he's shifted, does this make him shifty? I sure think so and I gave him money and voted for him!

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Posted by: janeseven | June 2, 2009 6:37 PM

What a joke.. is this the "change" you were looking for?

Posted by: Immanurse | June 2, 2009 6:33 PM

He ridiculed McCain for wanting to tax health benefits. The idea must not be so ludicrous after all, huh?

Doesn't this proposal tax the 95% of us who weren't supposed to see any tax increase whatsoever?

Reminiscent of read my lips.

Posted by: ktchvl | June 2, 2009 6:19 PM

Willing to Tax?!!

Golly!

Who'd have thunk that?! ;~)

Posted by: SAINT---The | June 2, 2009 6:15 PM

Well, so much for not raising taxes! Yes so far your income taxes are not going up. But proposals such as taxing employer provided health care programs, consideration of a VAT and the numerous other stealth taxes being consider will surely result in you have a lower net income.

The hope is you won't notice! Fat chance! When Americans figure out this slight of hand that will likely result in the largest non income tax increase in history
they will be livid.

Posted by: Jimbo77 | June 2, 2009 6:07 PM

I am a Canadian. Did you know that 45% of every provincial budget in Canada is dedicated to health care - this I might add is untouchable. There is also countless millions given to each province for health each year by the Federal Government. A number U.S. states are already in bankruptcy or close to it. Are the citizens ready for the massive tax hikes that are needed for socialized medicine. Believe me, it can't be done on borrowed money - it has to come from taxes. President Obama can spin it all he wants, but it comes down to taxes, taxes taxes!

Posted by: brely | June 2, 2009 6:03 PM

Well, so much for the vow that "95% of you will see tax DECREASES."

Posted by: WashingtonDame | June 2, 2009 6:00 PM

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