White House, Baucus downplay rift on health tax

The White House and a key Senate Democrat sought to quell concerns about their differences of opinion on how to tax health benefits.

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Senate Finance Committee Chairman Max Baucus (D-Mont.), who favors taxing some health coverage, emerged from a meeting with President Obama Tuesday declaring that the option remains under consideration for healthcare reform despite the president’s past opposition.

“It’s something that he might consider,” Baucus said after the meeting. “It was discussed and it is on the table.”

In addition to whatever policy case there is to be made for the reform, Baucus needs to generate tax revenue to pay for the rest of the healthcare bill, including covering the uninsured.

Obama has never supported limiting the so-called tax exclusion for health insurance obtained at work and offered alternative ways to raise tax revenue in his budget, such as capping itemized deductions — a fact he raised with Democratic senators during a closed-door meeting Tuesday, according to White House spokesman Reid Cherlin.

“He made it very clear that he prefers the approach he has already outlined,” Cherlin said.

“I think we have been clear that it was not in the president’s plan, it is not in our budget. You heard today from Sen. Baucus that he and others have been putting out that idea forward and I think we need to stay where we are,” White House Office of Management and Budget Director Peter Orszag said Tuesday.

“We are saying that we want the legislative process to play out and that’s all we have to say on that,” Orszag added.

Nevertheless, the White House and Baucus indicated that their mutual desire to pass a comprehensive healthcare bill this year would be the overriding factor in the coming months.

“The president and the senators reaffirmed their commitment to passing health reform that brings costs under control, maintains choice, and expands coverage,” Cherlin said.

“We are all committed, all of us and the president, to get this done,” Baucus said.

Many healthcare reform advocates favor eliminating or capping the currently unlimited tax exclusion for health insurance provided by employers. Proponents of the change say that the policy encourages overly generous health coverage that leads to unnecessary medical expenses.

But Obama came out strongly against making any changes to the tax exclusion during his race for the White House. Indeed, the Obama campaign lambasted GOP candidate Sen. John McCain (Ariz.) for proposing to eliminate the exclusion.

Democrats on Capitol Hill are far from unified on the healthcare tax issues. House Ways and Means Committee Chairman Charles Rangel (D-N.Y.) earlier this year said he was not interested in taxing employer-sponsored health benefits, though he has sought to soften his position in recent weeks.

Moreover, any attempt to place limitations on the tax exclusion would generate fierce opposition of labor unions, an important Democratic ally on healthcare reform, and large employers.

Nevertheless, Baucus and other lawmakers appear determined to include some form of cap on the tax exclusion in the bill set to be marked up this month.

Sam Youngman contributed to this article.