One of the key differences between the House and Senate legislation has been the financing mechanism, with the House passing a tax of 5.4% on individuals with annual modified adjusted gross income exceeding $500,000 or for couples with $1 million a year, beginning in 2011. The financing mechanism in the Senate Finance bill, the one expected to prevail in the merger between SFC and HELP, included an excise tax on high-cost insurance plans, potentially including plans of middle-class workers in high risk jobs.
Reid is now reportedly considering an approach much closer to the House bill.
WASHINGTON -- Majority Leader Harry Reid is considering a plan for higher payroll taxes on the upper-income earners to help finance health care legislation he intends to introduce in the Senate in the next several days, numerous Democratic officials said Wednesday.
These officials said one of the options Reid has had under review would raise the payroll tax that goes to Medicare, but only on income above $250,000 a year. Current law sets the tax at 1.45 percent of income, an amount matched by employers.
It was not known how large an increase Reid, D-Nev., was considering, or whether it would also apply to a company's portion of the tax. President Barack Obama has said he will not raise taxes on wage earners making less than $250,000.
The officials spoke only on condition of anonymity, saying they were not authorized to disclose details of private deliberations.
Reid's spokesman, Jim Manley, declined comment and said the majority leader has made no final decisions and is awaiting detailed information from the Congressional Budget Office about the cost and coverage implications of the proposals he has drafted.
If true, this is a signficant step toward making the job of conferees simpler. It's a good idea on a number of levels, including the fact that it's not likely to be perceived as a "new" tax, it's increasing an existing tax on the wealthy. It would remove one serious, and well-founded, objection on the part of labor, who often negotiate away wage increases to secure those high-cost insurance plans that provide better coverage for their members in high risk jobs.
Jon Walker points out another benefit of this approach:
[T]his tax change would be “health care money.” Many Senate conservatives have been demanding reform only be paid for with money “inside the health care system.” This move might stretch the limits of this weird standard, but if this framing allows it to pass through the Senate, that is all that matters. If Reid can get the Senate bill to more heavily rely on taxing the wealthy, and less on taxing employer-provided health insurance benefits, it could reduce the number of contentious issues needed to be settled in conference.
Hopefully this trial balloon is one that floats. It's a good idea.