In order to gain congressional support for his proposed health care plan, President Obama has made it a priority to limit its costs to about $1 trillion dollars. Prior estimates of the bill’s cost were at around $1.6 trillion, but U.S. Senate Finance Committee Chairman Max Baucus and his panel proposed to trim the cost to $1 trillion, without increasing the budget deficit. Instead,
Baucus, 67, the chairman of the Senate Finance Committee, says the best way to pay for a $1 trillion overhaul of American medical care would be to tax health benefits provided by employers that are more generous than those offered to federal workers — including lawmakers like him. The government benefits are worth $4,200 for individuals and $13,000 for families.(Bloomberg)
According to the Center on Budget and Policy Priorities, this proposal would affect up to 40 percent of Americans who currently receive health benefits from their employer. Thus, this proposal is inconsistent with President Obama’s pledge to avoid raising taxes on the 95 percent of Americans who earn less than $250.000. To deal with this conflict,
Obama has countered proposals to tax health benefits with a recommendation that Congress pay for the overhaul by limiting deductions overall for high-income people. Still, the president said in an interview this month with Bloomberg News that he wouldn’t rule out a benefits tax.
This proposal of a benefits tax appears to catch two birds with one stone for the administration. Taxing employee health benefits will likely result in less health benefits being provided by employers, which in turn would steer more employees into enrolling in the proposed government alternative. Wouldn’t that be convenient for fans of government-run health care?!