Is President Obama Considering Taxing Health Care Benefits?

By Kate Barrett

Mar 15, 2009 6:16pm

The New York Times today reported today that the "Obama administration is signaling to Congress that the president could support taxing some employee health benefits, as several influential lawmakers and many economists favor, to help pay for overhauling the health care system."

The report was used by Republicans to paint the Obama administration as hypocritical, because then-candidate Obama hammered Sen. John McCain, R-Ariz., for making a similar tax proposal during the campaign to help fund his health care proposal. "Taxing your health care benefit," then-Sen. Joe Biden, D-Del., said during the campaign. "I call that the ultimate ‘Bridge to Nowhere.’"

Then-Sen. Obama ran a TV ad against McCain on the idea saying, "McCain would impose a new tax on health benefits, taxing your healthcare for the first time ever. It’s a multi-trillion dollar tax hike. The largest middle class tax increase in history."

McCain wrote on his twitter page today, "Sunday Show Roundup: Obama Admin now agree to taxing some employer health benefits, sound familiar?"

But Obama administration aides immediately characterized the Times report as much ado about very little, saying the idea is on the proverbial table along with nearly every health care reform idea under the sun, but not being pushed or particularly supported by the White House.

"I saw this, the article you’re talking about," White House economic adviser Austan Goolsbee said on "Fox News Sunday." "I thought that was highly overstated. That is not in the president’s budget. The president’s budget — you have it there on the table. It does not include this provision. This appears to be coming from (when) the administration and representatives of the administration went to Congress and said, ‘We are open to all ideas to talk about health reform.’"

Goolsbee noted that "there are some people in Congress who are pushing this, but that is not the president’s idea."

The Times report cites as evidence of this "signaling" of a willingness to consider the idea testimony from Office of Management and Budget director Peter Orszag who told the Senate Finance Committee, according to the Times, that the "idea" "most firmly should remain on the table."

Orszag made those comments on March 10, referring to three ideas mentioned by Sen. Ron Wyden, D-Ore.: insurance market reform, making tax rules progressive rather than regressive, and requiring some personal responsibility for, for instance, uninsured taxpayers who make more than $60,000 a year.

"Again, at this point, I think everything, including those three, most firmly, should remain on the table," Orszag said.

Earlier in the hearing the OMB director had said "with regard to benefits and coverage we want to leave everything on the table at this point to allow the process to play out. So you should not expect and you will not be receiving definitive answers from me on exactly what the administration does or does not favor on the benefits-and-coverage side of health reform."

In fact, the notion of everything being on the table came up so often, the chairman of the committee, Sen. Max Baucus, D-Mont, asked toward the end of the hearing, "Is there anything off the table as far as the administration is concerned?"

"Not to my knowledge, no," Baucus said. "Everything is on the table."

"Okay," Baucus said, "It’s a pretty big table, and stacked pretty high."

At a different hearing on March 4, Treasury Secretary Tim Geithner — confronted with opposition to the Obama administration’s proposal to reduce tax rates for itemized deductions for people who make more than $200,000 a year — said when asked about taxing health insurance benefits, "One of the principles in the president’s budget is, again, to try to preserve our employee-based health-care system. As you know from his comments during the campaign, that’s a very important part of his system. We’d like to preserve that."

That said, Geithner continued, "we recognize there are other ways to do this. And we want to work with you on how best to put together an effective package of reforms that’s fiscally responsible that meets the president’s broad principles."

Asked today if the president is open to the idea, Goolsbee said, "he is open to all ideas. He said, ‘Let’s put all ideas on the table.’" Taxing health insurance benefits, he went on, "is not the president’s idea.  It’s not in his health plan.  It’s not in his budget."

On NBC’s "Meet the Press", Obama White House Dr. Christina Romer, chair of the Council of Economic Advisers, was asked if the President remains opposed to taxing health care benefits as he was during the campaign.

"He is still opposed to it," Romer said. "He certainly was very critical and very skeptical of it.  It is certainly not in our proposal.  And we have proposed other ways to deal with health care and to fund it.  And so no, it is not something that he supports…His skepticism from the campaign absolutely is, is still there."

Romer refused, however, to say the idea was "off the table."

On CBS’ "Face the Nation", National Economic Council director Larry Summers was asked about "reports that the president may now favor taxing health care benefits."

"That’s not in the president’s proposal," Summers said. "The president’s laid out his principles for judging whatever we do to emphasize lower costs and higher quality, to emphasize allowing people who got a good relationship with their employer in terms of health insurance to continue to continue that relationship. Those are the president’s principles. He’s put forth his proposal….Different things will come out of the Congress, but the president has put forth his proposal and his principles."

- jpt

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