Whenever I talk to anyone at the White House about the difficulties they are having on Capitol Hill figuring out a way to pay for health reform, they remind me that the President Obama still has an idea on the table–one that has never been taken very seriously at the other end of Pennsylvania Avenue. His proposal is to put a 28% limit on the tax break for itemized deductions claimed by those making over $250,000. That’s about 20% less than they are allowed to claim now. It would have raised an estimated $318 billion over the next 10 years. But the opposition is formidable. Charities, for one, worry that this would dampen giving at a time when they need it most.
Alas, lawmakers aren’t having much luck coming up with something they like any better. Senator Max Baucus had hoped to raise roughly the same amount by taxing the most generous employer-provided health benefit plans–those costing $17,000 a year or more for a family–but that idea is running up against a lot of opposition from his fellow Democrats. However, that proposal polls badly, and would impose new taxes on a lot of middle-class people–firefighters, police, teachers, and others who have won generous health benefits as a result of collective bargaining. So Baucus has been sent back to the drawing board by Majority Leader Harry Reid.
Obama’s initial proposal had been pretty much left for dead by the legislative roadside, but all of a sudden, it’s back in the mix of options being mentioned as a way of making up the funding gap. And it was also endorsed this morning by the Oracle of Omaha (you can hear Warren Buffett talk about it late into the video).
Is this where things end up? I still wouldn’t bet on it. But it is looking more and more likely that the answer to funding the overhaul of health care will include some additional taxes aimed at the wealthy. In the House, for instance, the Ways and Means Committee is looking at an income tax surcharge. And one thing is clear: If legislators don’t figure out a way to make the math work in coming days, the whole question is likely to get kicked off until after the August recess.