Senators weigh tax hikes to pay for health care for uninsured

After weeks of discussing ways to provide health care to the uninsured, Congress is beginning the difficult task of finding a way to pay for it.

Lawmakers are considering a broad range of ideas — including a federal tax on sugary sodas — but a key Senate committee focused Tuesday on a proposal to tax health insurance that millions of workers get through their employers.

"I don't think you can avoid taking that on," Gail Wilensky, senior fellow at the health education foundation Project HOPE, told the Senate Finance Committee, which is helping to craft an overhaul of the health care system.

Nearly 164 million people, or 62% of the nation's non-elderly population, receive health insurance through work, according to a joint congressional committee on taxation. Money spent on insurance provided by employers is excluded from an employee's taxable income. If the exemption was lifted entirely, it could have raised about $226 billion in 2008, the joint committee reports.

During the campaign last year, President Obama opposed taxing employer-based health care benefits, and White House press secretary Robert Gibbs reiterated that opposition Tuesday.

Even so, Senate Democrats are taking a closer look at the idea of at least limiting the tax break. Senate Finance Chairman Max Baucus, D-Mont., said the exemption helps the well-off more than the poor, who are less likely to receive health care through work. "The current tax exclusion is not perfect," Baucus said. "We should look at ways to modify the current tax exclusion so that it provides the right incentives."

Baucus said the idea of repealing the break entirely is "just not going to happen," but said Congress could cap the amount of benefit made available tax-free. He also said lawmakers may set an income limit so the exemption would not apply to high-paid employees.

Wyoming Sen. Mike Enzi, the top-ranking Republican on the Senate's Committee on Health, Education, Labor and Pensions, also supports the idea of repealing the exemption.

"If we're serious about health care reform," he told the conservative Heritage Foundation think tank Tuesday, "we will leave the tax exclusion on the table."

Gerald Shea of the AFL-CIO said limiting the tax break is "a step in the wrong direction" because it could punish employees who negotiated for better health care coverage rather than higher wages. Also, some employees pay more for health care insurance because of factors outside of their control, including the size of their company, he said.

The committee also discussed a proposal to create a penny-per-ounce federal tax on soft drinks, which the Center on Budget and Policy Priorities estimates could raise $10 billion a year, and raising taxes on alcohol and cigarettes.

For the second time in a week, the committee was interrupted by protesters who want a government-run health insurance system. Five protesters yelled out their objections at Baucus and were led out of the committee room by police.

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