CQ POLITICS NEWS Feb. 22, 2010 – 1:28 p.m.
President Obama’s proposed methods of paying for health care legislation bridge the differences between the House and Senate versions of the bill and attempt to resolve some of the conflicts that have hung over the legislation for months.
According to a summary released Monday by the White House, Obama would retain an excise tax on high-cost health insurance plans that House Democrats dislike, but would delay it and soften it. In a nod to those same House Democrats, the president’s version leans more heavily on wealthy taxpayers by expanding the Medicare portion of the payroll tax to certain investment income.
The proposal also makes several changes to the fees imposed on various industries.
The excise tax has been controversial, particularly among liberals, and its inclusion in the Senate bill has been one of the major sticking points in the long process of trying to develop a consensus bill that both the House and Senate can pass.
The White House struck a deal earlier this year with union leaders who oppose the tax that would have delayed implementation of the tax for collectively bargained plans and state and local government employees. Monday’s announcement expands that delay to all workers, removing an argument that unions were getting a special deal.
The new version of the 40 percent excise tax would affect plans for individuals costing more than $10,200 a year and plans for families above $27,000. Those are nominally higher thresholds than in the previous versions, but the earlier bills assumed the tax would start in 2013, not 2018, and the new proposal contains a potential adjustment if health costs rise faster than expected. Like the previous versions, the thresholds would be indexed to the general inflation rate, plus 1 percent.
Obama turned to several different pots of money to make up for the lower revenue that would result from his proposed changes.
Most notably, he wants to apply payroll taxes to investment income and passive income, like that produced from rental property, for individuals making more than $200,000 and married couples making more than $250,000. This income would be subject to the current 2.9 percent rate that employers and employees now pay together.