Health bill financing vexes Democrats

By: Jeanne Cummings
December 1, 2009

As the Senate puts the finishing touches on its health care reform package, big problems already loom for the final negotiations with the House. And chief among them will be how to pay for it.

To be sure, abortion and a public option will grab plenty of headlines and lead to lots of rhetoric on each side. But reconciling those issues could seem easy when compared with the yawning differences between negotiators over a funding mechanism.

Thus far, the White House, House and Senate have each embraced a different financing plan for its proposal — and each one is an anathema to the other players and their allies among powerful interest groups.

How the Democrats resolve the financing question could ultimately prove to be the most important decision they make, because it will resonate far beyond any final action on health care.

“It’s going to shape perceptions of the party going into 2010 and 2012, particularly if the choices are perceived as ideological in some way,” said Anne Kim, director of the economic program at Third Way, a moderate Democratic think tank.

When the White House launched the health care debate last winter, it proposed paying for a health care overhaul by reducing the charitable tax deduction available to families making more than $250,000 a year.

Not surprisingly, the idea prompted outrage from institutions whose lifeblood is those donations: major universities, the United Way, public broadcasting, religious organizations, the cancer society and the arts community.

In unison, they argued the tax cap would discourage giving at the worst possible time, in the midst of the deepest economic downturn since the Great Depression. The White House tried countering that it wouldn’t take effect for a few years and that a generous tax deduction would still remain.

But the idea was essentially DOA on Capitol Hill, and no one expects it to be revived during final negotiations. “That’s too hard a place to go,” said Scott Lilly, a budget expert at the Center for American Progress…

…Some outside economists, for instance, warned that Congress could be sowing the seeds of future political problems since the tax would eventually hit the middle class after a decade or two of wage inflation.

But the measure’s most important detractors reside in the Senate.

Not only are many senators rich, making them personally aware of the impact of the tax, even more of them are ambitious. Big tax increases can become big impediments on the road to the White House.

Given that the Democratic Congress next year is poised to let the Bush tax cuts expire for the wealthy, the House proposal to create a new tax on them was DOA down the hall in the Capitol…

Read the entire article here.

Comments are closed.