Hope and Fail

President pushes tax on health benefits

Despite holding the negotiations in private, details of the president’s negotiations with Congressional leaders on health care reform are leaking out faster than a TSA operations manual.

On the first day of talks, President Obama is pushing House Democrats to drop their opposition to new taxes on what’s called “Cadillac” health insurance plans. From the Associated Press:

President Barack Obama signaled to House Democratic leaders Wednesday that they’ll have to drop their opposition to taxing high-end health insurance plans to pay for health coverage for millions of uninsured Americans.

In a meeting at the White House, Obama expressed his preference for the insurance tax contained in the Senate’s health overhaul bill, but largely opposed by House Democrats and organized labor, Democratic aides said. The aides spoke on condition of anonymity because the meeting was private.

House Democrats want to raise income taxes on high-income individuals instead and are reluctant to abandon that approach, while recognizing that they will have to bend on that and other issues so that Senate Majority Leader Harry Reid, D-Nev., can maintain his fragile 60-vote majority support for the bill.

So the president is asking the House to compromise and vote for taxes on health benefits — an idea for which he blasted John McCain during the 2008 campaign. It came up in all three of their debates and in Obama campaign rallies.

Obama during the first debate in Mississippi:

Just one last point I want to make, since Senator McCain talked about providing a $5,000 health credit. Now, what he doesn’t tell you is that he intends to, for the first time in history, tax health benefits.

So you may end up getting a $5,000 tax credit. Here’s the only problem: Your employer now has to pay taxes on the health care that you’re getting from your employer. And if you end up losing your health care from your employer, you’ve got to go out on the open market and try to buy it.

It is not a good deal for the American people. But it’s an example of this notion that the market can always solve everything and that the less regulation we have, the better off we’re going to be.

And the second one in Nashville:

Now, Sen. McCain has a different kind of approach. He says that he’s going to give you a $5,000 tax credit. What he doesn’t tell you is that he is going to tax your employer-based health care benefits for the first time ever.

So what one hand giveth, the other hand taketh away.

And during the final debate in New York:

Now, what we haven’t talked about is Sen. McCain’s plan. He says he’s going to give you all a $5,000 tax credit. That sounds pretty good. And you can go out and buy your own insurance.

Here’s the problem — that for about 20 million people, you may find yourselves no longer having employer-based health insurance. This is because younger people might be able to get health insurance for $5,000, young and healthy folks.

Older folks, let’s healthy folks, what’s going to end up happening is that you’re going to be the only ones left in your employer-based system, your employers won’t be able to afford it.

And once you’re out on your own with this $5,000 credit, Sen. McCain, for the first time, is going to be taxing the health care benefits that you have from your employer.

And this is your plan, John. For the first time in history, you will be taxing people’s health care benefits.

The president also couldn’t help himself during a rally in Newport News, Va. between the debates:

Senator McCain has been eager to share some details of his plan – but not all.

He tells you that he’ll give you a tax credit of $2,500 per person – $5,000 per family – to help you pay for your insurance and health care costs. But like those ads for prescription drugs, you have to read the fine print to learn the rest of the story.

You see, Senator McCain would pay for his plan, in part, by taxing your health care benefits for the first time in history. And this tax would come out of your paycheck.

The Obama campaign even made an ad on the topic.

Just want to make it clear that the president was vehemently opposed to this idea during the campaign. There were signals of his shift before, but now that there is a real bill, the president is acting — and he’s breaking his promises.

Even though the Democrats call the plans they’re about to tax — at 40 percent — “Cadillac” plans, most of the people who have them aren’t rolling in dough. Many are skilled laborers who belong to a union, others are teachers and public servants.

As Fox News reports:

The Senate health care bill could end up hitting middle-class workers hard, through a new tax on insurance plans that could ultimately cut through to their wages.

… But the Senate bill raises the biggest chunk of its new revenue through a 40 percent tax on so-called Cadillac health insurance plans — plans that cost more than $23,000 per family.

And that tax, critics say, will trigger a series of changes that will result in billions of dollars in new taxes on the middle class over the next decade.

First, the tax will hit plans widely used by middle-class employees. The majority of workers with the high-value plans are union members and state government employees who are not considered wealthy, even though Obama advisers like to say the tax is aimed at benefits enjoyed by the likes of Wall Street bankers.

“A lot of those folks that have Cadillac plans have Chevy wages. And that’s what makes it, has made it, somewhat controversial and a real issue of contention,” said Jim Kessler, vice president for policy with the non-profit think tank Third Way.

Second, some say the tax will make many of the high-value plans too expensive and slowly cause them to disappear — since employers could wind up cutting back on benefits they offer to avoid any passed-on price increase.

Third, as those union members and other workers lose their health benefits, which are not taxable, the Senate assumes the lost benefits will be replaced by wages, which are taxable.

Now remember when the president said, also in all three debates, that he wouldn’t raise a dime of taxes on anyone making less than $250,000 a year?

No? Here’s a reminder.

Of course, He already broke that promise.