Swing-State Senators Concerned About Tax on Employer-Paid Coverage
By Shailagh Murray
Senate Democratic leaders are warning Finance Chairman Max Baucus (D-Mont.) that growing opposition to a tax on employer-provided health care benefits could prevent the chamber from passing health-care reform. They are urging Baucus, the Senate’s lead negotiator, to seek other revenue options.
A Democratic source familiar with the discussions said that the concerns are especially pronounced among new senators from swing states. Tax-free health benefits represent the biggest loophole on the Internal Revenue Service’s books, worth an estimated $1 trillion over 10 years. Even taxing only the most expensive benefits, at $17,000 per family after 2013, could yield about $418 billion over 10 years, a June estimate by the Joint Committee on Taxation showed.
But the idea rates terribly in opinion polls: The latest Washington Post-ABC News poll found 70 percent of Americans opposed to a new federal tax on such pricey employer-paid health insurance benefits. Among those who live in swing states (those that were decided by fewer than 10 percentage points last November), 77 percent were against this proposal in late June.
Among those benefiting from the tax exclusion are middle-class workers and many union members who receive generous employer-provided coverage.
Sen. Kent Conrad (D-N.D.), who is helping Baucus to assemble the finance bill, said lawmakers will examine variations on the exclusion, along with other revenue sources. “There are different ways to do it,” said Conrad. “We are searching for options, and there are a fair number of them that can work.”
Sen. Ron Wyden (D-Ore.) has proposed one alternative: He would replace the exclusion with a tax deduction that captures some revenue from health benefits but also allows people to keep their coverage when they change jobs.
Another alternative is the proposal President Obama favors, capping tax deductions for high-income individuals. Conrad said that is still on the table.
Or Congress could tax sugary beverages, targeting the public-health costs of diabetes and obesity while bringing in about $50 billion over 10 years. But many lawmakers oppose the sugar tax because it would disproportionately affect low-income people.
Democrats on the House Ways and Means Committee spent the day haggling over possible tax increases, including a 2 percent surcharge on households with incomes of $250,000 or higher. That would push the top tax rate to 41.5 percent, if President Bush’s tax cuts are allowed to expire on schedule next year and the top rate returns to the pre-2001 rate of 39.5 percent. The surcharge would raise about $250 billion in revenue over 10 years, congressional estimates show.
But Conrad and other critics note that surcharge revenues would not grow as quickly as the cost of expanding coverage through subsidies and the significant Medicaid expansion that lawmakers are seeking.
Plugging the exclusion gap would keep pace. So would another major revenue source on the table: lowering Medicare and Medicaid payment rates to health-care providers. The White House will announce Wednesday a deal this week with major hospital groups that would slowly reduce the amount paid for uncompensated care, while also reducing the rate of growth in government payments for other services. Similar deals are in the works with other provider groups, industry sources said.
Polling director Jon Cohen contributed to this report.
By
Paul Volpe
|
July 7, 2009; 6:13 PM ET
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Posted by: Computer_Forensics_Expert_Computer_Expert_Witness | July 7, 2009 8:29 PM | Report abuse
The problem is that there are no Republicans representing "Swing States". So where the f*&% is Senator Webb when it comes to providing health care to those working class Virginians? Webb campaigned not only against the Iraq War but also on fighting for the working class.
Has Senator Webb become only the Senator for the BMW liberals and the "F... you, I got mine" masses of Northern Virginia?
Posted by: AD11 | July 7, 2009 10:32 PM | Report abuse
Swing state, Red state, Blue State, I don't care what state you represent. Forget about getting reelected. Do the right thing - not the "party thing" or the "political payback thing." We do not want the federal govt. involved in our health care decisions. Grow a spine and tell your "Leader" he has gone too, too, far and we are not going to take it anymore.
Posted by: marine2211 | July 7, 2009 10:34 PM | Report abuse
"But Conrad and other critics note that surcharge revenues would not grow as quickly as the cost of expanding coverage through subsidies and the significant Medicaid expansion that lawmakers are seeking."
This statement is very misleading.
You can design a surtax that is adjusted each year based on the rising cost of health care. The revenue generated from this surtax keep up with outlays.
Also, using a cap of $17,000 and adjusting it to match the cost of overall premium increases (health care costs) this proposal will also not generate rising revenues over time and would not cover the cost of outlays.
If Conrad thinks he can sell the American people a "stealth tax" he is very mistaken ... we aren't stupid.
Posted by: cautious | July 8, 2009 1:56 AM | Report abuse
You dummies would rather see the for profit health insurance companies make your health care decisions? That's what the current system has given us and that's a major reason why health care is in the sad state it's in now!
The health insurance industry has no one to answer to other than it's shareholders. They make your health care choices based of their profit margins. They skim billions out of what should be going toward keeping you and your families healthy.
This government was set up by our forefathers as a representative democracy. The government is you... you fools! You elect the people who represent you. They are beholden to you!
If you don't like the decisions they make, you can fire them at election time. Try to fire a health insurance company executive and see how fast your insurance is canceled!
If you folks would vote based on issues that are truly important to you and your family's well being, instead of the stupid "morality" wedge issues that have little or nothing to do with you, we'd have a far more intelligent government in Washington!!!
Posted by: denroth | July 8, 2009 2:02 AM | Report abuse
"Even taxing only the most expensive benefits, at $17,000 per family after 2013, could yield about $418 billion over 10 years, a June estimate by the Joint Committee on Taxation showed."
If you do some research you will find that in order to collect $400 billion in revenue over 10 years you will need to tax more than "Cadillac" plans.
First, a $17,000 family plan today is expensive, but 5 yrs from now (in 2013) with health care costs increasing at 9% a year it will be the average price.
So, if you adjust the cap every year to the price of medical cost inflation it will only generate about $62 billion over 10 years.
On the other hand if you only adjust the cap by the CPI almost every worker with health benefits will be paying taxes by the 10th year.
The following document explains it well:
http://www.urban.org/publications/411916.html
Posted by: cautious | July 8, 2009 3:30 AM | Report abuse
My wife and I pay over 600 dollars a month for health insurance coverage that has many exclusions and high copays for everything.
I consider that premium to be a defacto tax.
What good is health insurance that you can't use without going broke?
No, it's time for a public plan. It's the only "stimulus" insurance companies understand.
It's the only thing they fear.
Posted by: seemstome | July 10, 2009 8:40 AM | Report abuse
The comments to this entry are closed.
Leave it the heck alone. We don't need a "public option." We don't need the Government low-balling doctors for fees, which in turn results in sub-standard services and no money for R&D.
I have seen what these systems have done in the State of Colorado, Canada, Great Britain and other countries. Either the system went bust, it was discontinued or the level of service 5ucks.
More spending and more stimulus on top of this mess. Have the members of congress lost what little sense is out there?
Is it 2010 yet?