WASHINGTON -- President Obama's original plan to pay for his healthcare reforms was to limit charitable contributions and mortgage-interest payments that people can deduct from their taxable income.
But both proposals were nonstarters from the moment they reached Capitol Hill. They would raise taxes on the two sectors that we need to be encouraging, not stifling. The former would reduce charitable giving. The latter would hurt the beleaguered housing industry at a time when it needs all the incentives it can get.
So now Democratic leaders are considering yet another tax-free benefit they can tap into: employer/employee health-insurance premiums.
About 150 million Americans and the businesses they work for do not pay taxes on that part of their income that goes to pay for health care. But North Dakota Sen. Kent Conrad, the Senate Budget Committee chairman, thinks this may be the only way to finance a plan that will cost taxpayers between $1.5 trillion and $2 trillion over the next decade, and much more after that.
Lawmakers spend a lot of their time searching for the last remaining sources of untaxed income they can get their greedy hands on to spend as they see fit. They are now salivating over untaxed income that goes to pay the premiums for most of the country's insured Americans.
"Tax subsidies for health care. They're huge. Hundreds of billions of dollars a year," Conrad enthusiastically told reporters last week at the end of a Finance Committee meeting where lawmakers hashed out options to bankroll Obama's vast spending plan.
"It is hard for me to see how you have a package that is paid for that doesn't include reducing the tax subsidy for health care," Conrad said.
Organized labor would no doubt have big problems with this. In recent decades, unions have often emphasized better benefit packages, including more generous health-insurance plans, over higher wages. But it would strike at the benefits for nonunion workers, too.
Letting employers and employees deduct the cost of their health care is probably the most successful market-driven medical-care reform we've made in this country. We shouldn't be cutting back on this benefit. On the contrary, we should be giving these same tax breaks to workers whose employers do not provide them with healthcare plans.
Republicans have been proposing healthcare tax credits for years for the bulk of the uninsured. But this, of course, would also expand the private healthcare industry, which would create multiple health-insurance plans to fit every pocketbook, and that goes against everything Democrats believe in.
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