Blog - Reid Considering a New Tax Plan for His Bill

Senate Majority Leader Harry Reid (D-NV) has started the necessary procedural moves to bring health care reform to the Senate floor early next week. Reports out today indicate that he’s currently making some major, last-minute tweaks to his bill’s funding mechanisms.

The AP reports:

Majority Leader Harry Reid is considering a plan for higher payroll taxes on the upper-income earners to help finance health care legislation he intends to introduce in the Senate in the next several days, numerous Democratic officials said Wednesday.

These officials said one of the options Reid has had under review would raise the payroll tax that goes to Medicare, but only on income above $250,000 a year. Current law sets the tax at 1.45 percent of income, an amount matched by employers.

It was not known how large an increase Reid, D-Nev., was considering, or whether it would also apply to a company’s portion of the tax.

Bloomberg says that it may also apply to capital gains for people earning above the $250,000 threshold. All in all, it sounds a lot like the main funding mechanism in the House bill that was passed on Saturday (H.R. 3962). The differing funding mechanisms in the House bill and the Senate Finance Committee bill represent one of the biggest unresolved gaps between the leading health care bills in Congress.

The big question is why Reid is making the change. Will it be in addition to the “Cadillac” health plans tax in order to make up for other reductions or to increase spending in other areas, like affordability credits? Or will it basically swap out the “Cadillac” tax in order to shore up support from unions who oppose it? Reid’s bill is currently being reviewed by the Congressional Budget Office and will be made public sometime in the next couple of days.