Reid Looking at Medicare Tax Hike on Well-to-Do Couples
By Lori Montgomery
Senate Majority Leader Harry M. Reid, days away from unveiling the Senate's version of health reform legislation, is considering a new tax on families earning more than $250,000 a year to help finance the package, Democrats said Thursday.
Reid (D-Nev.) is looking at raising the Medicare payroll tax, currently set at 1.45 percent, on such high earners, according to two Senate Democratic sources who spoke on condition of anonymity in order to discuss private negotiations.
Another option is applying the Medicare tax for the first time to capital gains income, White House budget director Peter Orszag said Thursday at a Washington summit organized by a corporate affiliate of Bloomberg News.
Either option would generate more cash, which would allow Reid to increase subsidies in the Senate's package to help low- and middle-income people purchase health insurance. Alternatively, the money could be used to scale back a tax on high-cost health insurance policies. That tax was proposed by the Senate Finance Committee but has proven hugely unpopular with labor unions, whose members tend to hold such so-called "Cadillac" policies.
The Cadillac tax failed to gain traction in the House, which approved its version of the health overhaul on Saturday. The House bill instead relies on a 5.4 percent surtax on the rich, targeting income of more than $500,000 a year for individuals and $1 million a year for families. Either of the Medicare taxes would move the Senate's tax policy closer to the House's position.
But Reid is unlikely to completely abandon the Cadillac tax, Democrats say. Because the tax would prompt people to avoid high-cost policies and shift cash out of the bloated health care system, congressional budget analysts and the White House have identified it as the most important provision in either bill for reducing the overall cost of health care.
Reid spokesman Jim Manley declined to comment on the health care deliberations, which are expected to conclude as early as Tuesday, when Reid could attempt to move a bill to the Senate floor.
November 12, 2009; 6:53 PM ET
Categories: Health Reform
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