Courting Republican Support... With A Tax Hike?

[ Posted Tuesday, June 16th, 2009 – 16:42 UTC ]

We have officially entered Cuckoo Bananas Land in the healthcare reform debate, it seems. Because that headline is correct -- some Democrats now think that the way to entice Republicans to vote for their healthcare bill is to raise people's taxes. Well, when I say "some Democrats," I should really use the more technically-correct "Senator Max Baucus." Because his plan doesn't even seem to have impressed many of his fellow Democrats so far.

At issue is taxing employer-provided health insurance benefits. Now, this is a gigantic loophole, it has to be admitted. Say your employer pays you $60,000 in salary, and also pays $16,000 a year for your health insurance plan. You are taxed only on the $60,000 (although your employer gets to write off the $16,000 as a business expense, as well as your salary). Any other benefit you get from your employer -- a car to use, a chauffeur-driven limousine, etc. -- is taxed as if it were cash. But not health insurance. It's always been done this way, and American workers are used to the system as it stands. To tax health benefits now (while it would be more logically cohesive with the rest of our tax code) would be an enormous change.

Which is exactly what Max Baucus is getting ready to propose. The real idea is to tax gold-plated health insurance plans that the very wealthy get, but you can bet a lot of people who call themselves "middle class" are going to get hit by this as well. There may be an exemption, something like "the average cost of health insurance" (I've heard both the numbers $13,000 a year and $15,000 a year talked about). So in the above example, perhaps only $3,000 (or $1,000) would be treated as income to be taxed out of the $16,000 in benefits.

But anyone who believes that this grand money-raising scheme is going to get a lot of Republican support is, quite frankly, delusional. Because the politics is exactly backwards. This is due to the fact that John McCain proposed this scheme during the election last year, and Barack Obama shot it down (and made a lot of political hay by doing so). Here is Republican Charles Grassley (the highest-ranking Republican on one of the two committees in the Senate dealing with healthcare bills), being interviewed by Chris Wallace on last Sunday's Fox News Sunday program:

WALLACE: Senator Grassley, will your Senate Finance Committee propose a tax on health care benefits? And would that hit people making less than $250,000 a year?

GRASSLEY: The answer is we could, but it's going to take the president of the United States, who made a big deal out of McCain so-called increasing taxes -- and the McCain plan was a very good plan, but the president drove it into the ground, won the election.

It looks like he's looking at doing similar to what McCain wanted to do, and I think for the benefit of making this bipartisan, presidential leadership in this area would be very good based upon the tune of the last campaign.

There is another reason, though, for dealing with this, and that is at what level should we be subsidizing through tax credits the health insurance.

And we -- it seems to me that we ought to take an average of the nation and decide that we're going to subsidize through the tax code health insurance for everybody at that level and not subsidize above another certain level.

That does two things. It takes some inflation out of health care, and it also raises some money.

WALLACE: So what you're basically saying -- and I want to move on, because we're beginning to run out of time. What you're basically saying, Senator Grassley, is -- and some people have said the number should be $13,000 -- if your insurance plan is worth $13,000, it's tax-free. Anything above that would get taxed.

When this proposal was presented to Democrats on the same Sunday morning, they all denounced the idea, from Vice President Joe Biden to Chris Dodd, who was on the same Fox News Sunday show as Grassley, and said almost immediately after that excerpt:

No, this is -- this is unnecessary, in my view, and I feel very strongly about this, as many do as well. I mean, the idea that you're going to have people out there that are struggling to make ends meet today, they're falling further and further behind with wages, people losing jobs, losing homes -- to turn around and say, "You basically have no change in your health care plan, and by the way, we're going to tax you now for those benefits"

And notice how even Grassley spoke of the idea -- "presidential leadership in this area would be very good." So allow me to recap: President Barack Obama is supposed to come out and say "John McCain was right, we should tax health care benefits as income," and then Republicans in Congress will say "I admire the president for admitting that John McCain was right, and we are fully behind this idea of raising taxes on a lot of Americans -- because it fits in so well with our party's ideology of higher taxes for all, all the time," after which these congressional Republicans will vote for the Democratic healthcare bill to give the president the bipartisan support he so obviously craves.

Excuse me, but on what planet?

The last Republican who boldly went along with Congressional Democrats raising taxes was George Herbert Walker Bush. And look what happened to him. Does anyone really think -- now that the Republican Party is down to its core base -- that Republicans are going to be lining up in favor of a tax increase? And yet, that is the conventional wisdom of the week in Washington, it seems. I haven't yet read a single Democrat going on the record in support of Baucus' idea yet. The White House is clearly saying "we don't think that's the right way to do things." Republican support for the idea is supposed to be out there somewhere, but other than Grassley's lukewarm words, I haven't seen any indication of such support either.

Even if Obama did come out and speak that line about McCain and support the idea, you know what the reaction of the entire Republican Party, speaking with one voice would be? "We TOLD you so! We told you Obama is going to raise everyone's taxes! Tax-and-spend Democrats! Elect more Republicans to stop raising taxes on every American family! Throw the Democrats out! Give us back Congress!" Republicans are simply not going to suddenly disavow Ronald Reagan and the last 30 years of their own rhetoric, just because John McCain had an idea during a campaign. It's just not going to happen.

The only worthy response to Max Baucus and the idea being floated among the chattering classes inside the Beltway right now that "tax increases are a good way to woo Republican support" is long and pronounced laughter. You can argue that the idea of taxing health benefits has merit or is stupid, but either way you argue this question, the concept that Republicans are going to support it deserves nothing more than howling fits of laughter.


-- Chris Weigant


5 Comments on “Courting Republican Support... With A Tax Hike?”

  1. [1] 
    fstanley wrote:

    I have heard this idea bandied around of late and I hope that it is a laughing matter. These crazy ideas have a bad habbit of gaining traction and suddenly they are a done deal.


  2. [2] 
    Osborne Ink wrote:

    Attempts to entice the GOP with failed planks of McCain's platform ARE futile. Yet I can't help but wonder why business -- and especially small business -- isn't on board with the public option.

    If there is a cheaper, public option, businesses will shift workers onto it as quickly as possible in order to cut costs. They won't even have to fire anybody to do that: the same people in HR will do the same job, only they will hand out government pamphlets instead of private ones.

    As long as we don't tax health benefits, private industry can at least compete. Defeating this notion is at least taking the bitter out of the pill.

    Speaking of health care: Chris, did you see the GOP's new "proof" that a public option would be bad? Insurance company horror-stories. Seriously!

  3. [3] 
    Michale wrote:

    ." So allow me to recap: President Barack Obama is supposed to come out and say "John McCain was right, we should tax health care benefits as income,"

    I am constrained to point out that there is ample precedence for President Obama to embrace ideas as President that he derided and laughed at during the campaign.

    Miranda rights for terrorists come to mind..

    So, it's not outside the realm of possibility that the President might also embrace this idea.

    "We TOLD you so! We told you Obama is going to raise everyone's taxes! Tax-and-spend Democrats!

    Oh, I think that ship has completely sailed.. 1.6 Trillion costs for the latest healthcare plan. Cap-And-Trade (or if you prefer the better known name, SCHEME & REAM) and so many other examples, I think it's a forgone conclusion that we are going to see massive tax increases to pay for the trillions of dollars that the Democrats have spent and are planning on spending.


  4. [4] 
    Michale wrote:

    Speaking of Cap/Trade (SCHEME/REAM) I came across this and it was just too funny NOT to share... :D



  5. [5] 
    Elizabeth Miller wrote:

    "...howling fits of laughter", indeed!

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