[Marxism] Obama open to taxing health benefits
lnp3 at panix.com
Sun Mar 15 08:18:54 MDT 2009
NY Times, March 15, 2009
Administration Is Open to Taxing Health Benefits
By JACKIE CALMES and ROBERT PEAR
WASHINGTON — The Obama administration is signaling to Congress that the
president could support taxing some employee health benefits, as several
influential lawmakers and many economists favor, to help pay for
overhauling the health care system.
The proposal is politically problematic for President Obama, however,
since it is similar to one he denounced in the presidential campaign as
“the largest middle-class tax increase in history.” Most Americans with
insurance get it from their employers, and taxing workers for the
benefit is opposed by union leaders and some businesses.
In television advertisements last fall, Mr. Obama criticized his
Republican rival for the presidency, Senator John McCain of Arizona, for
proposing to tax all employer-provided health benefits. The benefits
have long been tax-free, regardless of how generous they are or how much
an employee earns. The advertisements did not point out that Mr. McCain,
in exchange, wanted to give all families a tax credit to subsidize the
purchase of coverage.
At the time, even some Obama supporters said privately that he might
come to regret his position if he won the election; in effect, they
said, he was potentially giving up an important option to help finance
his ambitious health care agenda to reduce medical costs and to expand
coverage to the 46 million uninsured Americans. Now that Mr. Obama has
begun the health debate, several advisers say that while he will not
propose changing the tax-free status of employee health benefits,
neither will he oppose it if Congress does so.
At a recent Congressional hearing, Senator Ron Wyden, an Oregon Democrat
whose own health plan would make benefits taxable, asked Peter R.
Orszag, the president’s budget director, about the issue. Mr. Orszag
replied that it “most firmly should remain on the table.”
Mr. Orszag, an economist who has served as director of the Congressional
Budget Office, has written favorably of taxing some employer-provided
health benefits and using the revenue savings for other health-related
incentives. So has another Obama adviser, Jason Furman, the deputy
director of the White House National Economic Council.
They, like other proponents, cite evidence that tax-free benefits
encourage what Mr. McCain called “gold-plated” policies, resulting in
inefficient and costly demands for health care and pressure on employers
to hold down workers’ pay as insurance expenses rise. And, they say, the
policy discriminates against those — many of whom are low-income workers
— who do not have employer-provided coverage.
When Senator Max Baucus, Democrat of Montana, advocated taxing benefits
at a recent hearing of the Finance Committee, which he leads, Treasury
Secretary Timothy F. Geithner assured him that the administration was
open to all ideas from Congress. Mr. Geithner did, however, allude to
the position that Mr. Obama had taken as a candidate.
The administration’s receptivity to the idea is owed partly to the
advocacy of Mr. Baucus, whose committee has jurisdiction over tax policy
and health programs, and to support from Republicans. There is less
enthusiasm among Democrats in the House, though the health debate is at
an early stage and no comprehensive plans are on the table.
Also, Mr. Obama’s own idea for raising revenues for health care —
limiting the income tax deductions that the most affluent taxpayers
claim — has run into opposition not only from Mr. Baucus but also from
his counterpart in the House, Representative Charles B. Rangel, Democrat
of New York, who is chairman of the Ways and Means Committee.
Mr. Obama’s proposed limit on deductions would raise an estimated $318
billion over 10 years, or half of his proposed “health care reserve
fund.” That is a fraction of the revenues that could be raised from
taxing employer-provided health benefits.
In the campaign, Mr. McCain estimated that taxing all health benefits
would raise $3.6 trillion over a decade — “a multitrillion-dollar tax
hike,” one Obama advertisement said.
The Congressional Budget Office says that including health benefits in
taxable income could mean $246 billion in additional revenue for a
single year. Stopping short of full taxation, as Mr. Baucus and others
suggest, would mean less new revenue.
The latest government figures, for 2007, show that 70 percent of the 253
million people with health insurance received at least some of their
coverage through employers. Employment-based insurance covers
three-fifths of the population under 65.
Those who want to tax benefits in whole or in part make two main
arguments. They say the tax exclusion is a generous subsidy that
insulates employees from the true costs of health care, leading them to
demand more of it and driving up overall costs. Critics also say the
policy is unfair because it favors higher-income people. “It’s too
regressive,” Mr. Baucus said. “It just skews the system.”
But in a blueprint for health legislation that he issued last November,
Mr. Baucus said taking the exclusion on health benefits out of the tax
code would go “too far” and “cause widespread disruption in
employer-based health benefits.” Mr. Obama has also said he wants to
preserve employer-provided coverage. Mr. Baucus, in his paper, cited
other options, like taxing benefits above some value, taxing only
wealthy employees or both.
However the proposal is devised, advocates will not have an easy time
Republicans, like Mr. McCain and former President George W. Bush before
him, tend to favor taxing the benefits to finance other incentives for
people to buy their own insurance. But given Mr. Obama’s use of the
issue in his campaign, Republicans are unlikely to support a change
unless the president himself proposes it, a senior adviser to Senate
Many Democrats, especially House liberals, are opposed. “It’s a dumb
idea,” said Representative Pete Stark of California, chairman of the
Ways and Means Subcommittee on Health. “We have to maintain as much as
we can of the employer payments.”
Administration officials often say they will not repeat the mistakes of
former President Bill Clinton, whose plan for universal health insurance
collapsed in 1994. But Frank B. McArdle, a health policy expert at
Hewitt Associates, a benefits consulting firm, said, “If President Obama
agrees to cut back the tax break for employee health benefits, he will
risk repeating one of Mr. Clinton’s errors by disrupting health
insurance for people who have it and like it.”
Some big businesses consider nontaxable employment benefits a tool for
recruiting and retaining workers. The United States Chamber of Commerce
opposes eliminating the exclusion on health benefits, but James P.
Gelfand, senior manager of health policy, said the group had not taken a
position on limiting it.
Organized labor, a pillar of the Democratic Party base, considers the
benefits among the union movement’s historic achievements for the middle
class. But a split could be developing between the manufacturing unions,
which have negotiated rich benefit packages, and the growing service
employees unions, which include many low-wage workers without generous
Alan V. Reuther, legislative director of the United Automobile Workers,
said: “These proposals would represent a tax increase on working
families. They would undermine good health care coverage.”
But at the Service Employees International Union, which was an early
supporter of Mr. Obama, Dennis Rivera, the coordinator of the union’s
health care campaign, said that while his organization was “predisposed
not to agree to the taxing of health benefits,” he would wait to pass
judgment. The union, Mr. Rivera said, wants to see how any tax changes
fit into the overall effort to revamp the health care system. “We need
to see the total picture,” he said.
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