Obama: Yes, we may tax health benefits

With lawmakers trying to crunch the numbers on a $1 trillion health care overhaul, President Barack Obama is leaving the door open to a new tax on employer-provided health care benefits.

Senior senators said Wednesday the benefits tax could be essential for the complex plan to be fully financed.

"I don’t want to prejudge what they’re doing," Obama said, referring to proposals in the Senate to tax workers who get expensive insurance policies. Obama, who campaigned against the tax when he ran for president, drew a quick rebuff from organized labor.

For Obama, the health care debate got personal during an ABC News town hall at the White House on Wednesday. The prime-time program was the latest in a string of events designed to build public support for his plan to slow the rise in health care costs and expand coverage to the nearly 50 million uninsured.

Dr. Orrin Devinsky, a neurologist at the New York University Langone Medical Center, challenged Obama: What if the president’s wife and daughters got sick? Would Obama promise that they would get only the services allowed under a new government insurance plan he’s proposing?

Obama wouldn’t bite.

If "it’s my family member, if it’s my wife, if it’s my children, if it’s my grandmother, I always want them to get the very best care," Obama said.

Earlier in the day, the administration and its allies pushed for a prominent display of progress in the Senate before Congress begins a weeklong vacation Friday.

Senate Finance Committee Chairman Max Baucus, D-Mont., labored in a series of meetings to produce at least an outline of legislation that could command bipartisan support. Of the five House and Senate committees working on a health care overhaul, Finance is the only one that appears to have a chance at such an agreement.

Baucus appeared especially eager to show progress before the exodus from the Capitol begins.

Several officials said he was negotiating with representatives of the nation’s hospitals, hoping to conclude an agreement that would build on an $80 billion weekend deal with the pharmaceutical industry.

Hospitals were being asked to accept a reduction of roughly $155 billion over the next decade in fees they are promised under government programs such as Medicare and Medicaid, according to numerous officials.

Officials at the American Hospital Association and the Federation of American Hospitals said they could not comment on any discussions.

Baucus is seeking similar concessions from nursing homes, insurance companies, medical device makers and possibly others, noting that any legislation would create a huge new pool of customers for industry providers.

At its heart, any legislation is expected to require insurance companies to offer coverage to any applicant, without exclusions or higher premiums for pre-existing medical conditions.

Overall, Baucus has said he hopes to hold the size of any legislation to $1 trillion or less, and in private negotiations there were discussions about further scaling back eligibility for insurance subsidies from the government.

Additionally, Baucus was still searching for ways to cover the cost of his emerging legislation, and numerous officials said he appeared roughly $200 billion shy of achieving that goal. They added that a proposal to make it harder for taxpayers to itemize their medical expenses was drawing renewed interest among key senators as one way to raise revenue.

Current law allows those expenses to be itemized when they exceed 7.5 percent of adjusted gross income. The proposal under review would raise that to 10 percent, officials said.

At the White House, Obama sidestepped when asked if he was open to taxing health care benefits, a proposal he opposed vigorously in the campaign for the White House.

"I have identified the ways that I think we should finance this. I think Congress should adopt them. I’m going to wait and see what ideas ultimately they come up with," he said on ABC’s "Good Morning America."

Organized labor weighed in quickly.

Gerald W. McEntee, president of the 1.6 million-member American Federation of State, County and Municipal Employees, said in an interview that union leaders believe Obama is "a person of his word." He was referring to Obama’s opposition to taxing those benefits during last year’s campaign.

"They’re not going to tolerate that," McEntee said of workers’ views of that proposal.


Associated Press writers David Espo and Philip Elliott contributed to this report.


  1. ClassicLiberal

    Now we’re talking turkey!

    Obama’s promise that 95% of us will get a tax break???

    Yeah Boy !!!

  2. woody188

    He just failed to mention 100% of us will see a net tax increase even with a break or more likely a tax credit.

  3. ekaton

    I see nothing wrong with taxing the portion of health care insurance provided by an employer. After all it is a form of remuneration for labor provided.

    As long as I get a tax CREDIT for the portion I pay.

    If you add up all the other more or less hidden taxes and fees aside from income taxes we at the bottom, or the so called “lower middle class” and “working class” are probably paying 60% of our income in these fees.

    None of this is going to end well but for those at the top.

    Kent Shaw

  4. woody188

    This will hurt those making minimum wage most. A large number of my employees are only working for the benefits since the job pays $8/hr. Adding in the cost of family insurance nearly doubles their adjusted gross income. If this results in double their Federal taxes, they won’t net enough to live off of each week. Their weekly take home pay will be around $200 or less. I should know, I do the payroll each week.

    I’d like to see Obama and Congress live off $200 per week. Heck, Social Security pays a little more than that. Why work when you can leech for more money and get free government health benefits?

    So it will probably result in fewer insured via their work because folks will drop all coverage or drop to employee only coverage and force their families on the government plan where they aren’t taxed which will in turn result in much higher than projected costs, and much lower than expected tax revenue. In other words, this plan is bound to fail if enacted.

  5. ekaton

    A single-payer plan, Medicare For All for example, would eliminate your employee health insurance costs, eliminate their share of that cost (if that’s the type of program you have), and eliminate your own insurance premiums. Consequently, you might actually be able to pay the employees more, and actually cut your yearly expenses overall. I’d call that a win-win all around.

    I recently read an excellent article regarding the overall costs of the current private “system” compared to the overall costs of implementing Medicare For All. Medicare For All could actually wind up costing individuals and the government LESS for health coverage. It is even possible that no new tax increases would be required to finance Medicare For All. Win-win-win.

    All that is required is the political will to stand up to the insurance lobbyists.

    In anticipation of certain questions begged, some of the current employees of the insurance companies might be re-employed by Medicare For All. Others should be retrained at government (taxpayer) expense.

    As for the CEO’s and upper management, frankly I don’t give a whit what happens to them. I assume they are well off enough financially to fend for themselves.

    Kent Shaw

  6. Jim C

    Why don’t we just go back to the tax rates pre reagan , problem solved , oh , and lift the cap on FICA . Right wingers are always whinning about tax rates and say they want a ” flat tax ” well , that would be a good way to start .

  7. Jim C

    It would also eliminate workers comp , medicare , medicade , schip $20 hospital asprin and all of the other piece meal programs out there . The fact that medicare runs with such low overhead ( about 3% ) when handling the elderly who generate the most medical costs speaks volumes . Notice when conservatives yap about the cost they never mention the fact that by allowing everyone into the program it would render the aformentioned programs unnecessary .

  8. gazelle1929

    Fair Tax — perhaps the ultimate oxymoron.

    There really is no such thing as a fair tax so long as we have a system where some people make a lot more money than others.