Obama Jobs Bill Plan to Begin Taxing Health Insurance Stirs Opposition

President Barack Obama is asking lawmakers to tax the health-insurance benefits of top earners, stirring opposition from congressional Democrats who fought a similar proposal in the 2010 health-care law.

The provision, tucked deep inside the 155-page jobs legislation Obama submitted to Congress on Sept. 12, would make health plans provided by employers partially taxable for couples earning more than $250,000 a year and individuals earning more than $200,000.

For these taxpayers, the proposal is a dramatic departure from their current tax treatment, in which all their health benefits are exempt from taxation. It also revives a debate among Democrats over whether taxing health-insurance plans for the wealthy sets the stage for one day expanding the tax to lower-income brackets.

“To a large degree, we’ve visited that, and we already -- in health care reform -- did some of that,” said Senator Robert Menendez, a New Jersey Democrat and Finance Committee member who said he would rather focus on higher taxes for big oil companies than reopen the issue of taxing health benefits.

The resistance from Obama’s fellow Democrats indicates the president’s plan may not survive intact, as leaders of the Republican-controlled House have said they oppose other tax provisions intended to offset the cost of cutting payroll tax rates and spending on infrastructure, schools and aid to states.

Senator Richard Durbin of Illinois, the chamber’s No. 2 Democrat, said the caucus isn’t united behind Obama’s proposals to cover the bill’s $447 billion cost. Some Democrats would again oppose taxing some health plans, he said.

House Democrats last year forced revisions to a tax on high-value insurance plans that was included in the health-care law. Labor unions, which have fought to increase benefits for members as companies resisted wage increases, objected to the levy and pushed successfully to increase the threshold and delay implementation.

Starting in 2018, a 40 percent tax will be levied on plans worth more than $10,200 for individuals and $27,500 for families. The tax will be paid by insurance companies, though opponents argue that costs will be passed on to consumers.

An administration official, speaking on condition of anonymity, said there was no comparison between taxing plans for the highest earners and the earlier debate over taxing high- value, so-called Cadillac, health plans. The official, who wasn’t authorized to speak on the record about the proposal, said it targets high-income taxpayers who get a greater benefit from the current tax structure than do middle-income workers.

The official declined to comment on objections being raised by Democrats.

Senator Barbara Mikulski, a Maryland Democrat whose state includes some of the wealthiest counties in the U.S., said she didn’t support the health-care tax.

“I disagree with the president,” she said.

The proposal, she said, would be problematic for people with fluctuating incomes. Some of her constituents “might make one year $300,000 and the next year $30,000,” she said

http://finance.yahoo.com/news/Plan-to-Tax-Health-Insurance-bloomberg-3509229178....