Health care taxes not appealing to Congress

May 18, 2009 8:17:26 AM PDT
It's the toughest question of all in the debate over revamping the health care system - how to pay for expanding coverage to nearly 50 million uninsured people. Ask lawmakers about raising taxes and the responses range from emphatic opposition to noncommittal statements about "putting everything on the table."

Cutting costs is a popular idea, but few experts think enough savings can be wrung from the system to expand coverage to so many - despite pledges from medical providers.

Undaunted, Congress is forging ahead, but with no consensus in sight. Few of President Barack Obama's proposed tax increases have been well received on Capitol Hill, and there aren't many popular ideas coming from lawmakers, either.

Democrats, who have been fighting the tax-and-spend label for decades, are very much aware of what happened the last time a Democrat won the White House and a Democratic-controlled Congress voted to raise taxes. It was l993, and Republicans won control of Congress the following year.

"Ever since then they've been especially scared to deal with these difficult issues," said Eugene Steuerle, a Treasury official under former President Ronald Reagan.

Obama says his goals are to rein in costs, guarantee choice of health plans and doctors, and ensure that all Americans have access to affordable coverage. But guaranteeing coverage for all could cost $1.5 trillion over the next decade, which has some advocates concerned that Congress will pass a plan that falls short.

Medical providers have pledged to find $2 trillion in savings over the next decade, but much of that money will be needed to keep premiums from skyrocketing for those who already have coverage.

"So far, nothing tough has been done," said William Gale, co-director of the Tax Policy Institute, a Washington think tank whose research was often cited by Obama during the presidential campaign.

Rep. Charles Rangel, chairman of the tax-writing House Ways and Means Committee, said Congress "absolutely" has the will to raise taxes to pay for health care reform.

"Cut costs, raise revenue," the New York Democrat said. "Closing loopholes could be considered raising taxes, right?"

But Rangel is one of the few lawmakers to openly embrace tax increases. Today's Democratic Congress is, after all, very different from the one that helped former President Bill Clinton raise taxes in 1993 to reduce federal budget deficits. Democrats retook Congress in 2006 and expanded their majority in 2008 in part by electing moderates in Republican-leaning districts.

Many of those newly elected Democrats are wary of voting to raise taxes, especially when they are unlikely to get any Republican support.

"If you are a first- or second-term Democrat, why on earth would you want to vote in July or August 2009 for a tax increase that the president doesn't want to have take effect until 2011?"

asked Clint Stretch, managing principal of tax policy at Deloitte Tax. "You've just handed your opponent an extra year to campaign that you're a big-tax Democrat."

Republicans agree that the health care system needs to be fixed, but they are unlikely to support a government-run plan paid for by a tax increase. "Why would we ask the American people to pay more during a recession?" asked Rep. Dave Camp, R-Mich., top Republican on the House Ways and Means Committee.

House Speaker Nancy Pelosi has pledged to pass a health care reform bill this summer. Her take on taxes: "We're putting everything on the table."

Obama's proposal targets high-income families by reducing their tax deductions, including those for mortgage interest and charitable donations, for individuals making more than $200,000 and couples making more than $250,000.

The proposal would raise about $276 billion over 10 years as part of a "down payment" for health care reform, but key Democrats have said they worry it would hurt charitable organizations.

One critic has been Senate Finance Committee Chairman Max Baucus, D-Mont., who has been working for months on a plan that would tax at least some health benefits provided by employers.

Employer provided health insurance is currently untaxed.

Obama, however, opposed a similar plan offered by his rival in the presidential election, Sen. John McCain, R-Ariz. Baucus' plan is getting no better reaction from fellow Democrats in the House.

"I think it was a bad idea when John McCain proposed it and I think it's a bad idea today," said Rep. Mike Ross, D-Ark., who chairs the health care task force for the conservative "Blue Dog" Democrats.

A nutrition group has proposed a series of sin taxes to help pay for health care, including a tax on soft drinks that got a lot of attention at the Capitol. The group, the Center for Science in the Public Interest, said reducing soft drink consumption would "help slow the obesity epidemic."

The proposal prompted objections from the beverage industry, and even Clinton, who said in a broadcast interview that Congress should focus on containing costs rather than raising taxes.

Clinton, of course, remembers how hard it was to craft a massive health care overhaul when he was president. It went about as well as the 1994 elections did for the Democrats.


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