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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

Obama’s Cred Tested on Taxing Health Benefits

A little less than a year ago, (then) Senator Obama spoke on taxes in Dover, N.H., and pledged,

“And I can make a firm pledge: under my plan, no family making less than $250,000 will see their taxes increase – not your income taxes, not your payroll taxes, not your capital gains taxes, not any of your taxes. My opponent can’t make that pledge, and here’s why: for the first time in American history, he wants to tax your health benefits Apparently, Senator McCain doesn’t think it’s enough that your health premiums have doubled, he thinks you should have to pay taxes on them too. That’s a $3.6 trillion tax increase on middle class families. That will eventually leave tens of millions of you paying higher taxes. That’s his idea of change.

Now, WaPo‘s Ceci Connolly reports that President Obama is taking “a more nuanced approach” and taxing health benefits is “on the table,” as far as the President is concerned. Les Leopold, author of The Looting of America, weighs in on the topic with a HuffPo post warning that Obama is flirting with disaster. Leopold spotlights a group of workers who won a good health care policy from Verizon in a difficult struggle and notes:

American working people desperately want President Obama to succeed. They certainly do not expect him to break his word on taxing worker health benefits….These workers also provided rock solid support for Obama, including his call for health care reform so that all working people one day could enjoy similar coverage. In fact, for these workers one of the key distinguishing points between Obama and McCain centered on the taxing of health care benefits. They felt enormously threatened by McCain’s health tax proposals, especially since the cost of many of their excellent plans can exceed $20,000 a year per active member and even more for retirees and their families. Counting those benefits as taxable income would amount to an enormous tax increase for these workers, and their union made sure they understood this point during the campaign. In fact, labor unions all over the country distributed millions of pieces of campaign literature and made tens of thousands of phone calls to drive this point home.
Yet, team Obama led by Rahm Emanuel seems incredibly out of touch with this reality. In their desperate effort to find revenues for their national health care proposals, they are “pivoting” as they signal a willingness to consider taxes on the better, more expensive health insurance benefits. If the administration continues down that path, Obama will lose these workers, now and forever. They probably won’t vote for the Republicans in the mid-term elections, but they might sit it out or fail to campaign vigorously for Democrats.

It may not be fair to blame Emanuel, but Leopold makes an important point. If Obama trades away his earlier promise, he will be hammered mercilessly with GOP ads depicting his promise and its breaking. Breaking promises is a bad idea. Breaking such clearly-stated promises is even worse. His approval numbers will tank far deeper than they are now. Leopold tosses out a roundball analogy to frame the gravity of what is at stake:

Like a good basketball player, President Obama knows how to pivot. Like a good politician he also should know when to pivot and in what direction. But if he pivots towards taxes on health care benefits, he’ll find himself alone on the court with a bunch of blue dogs and bankers as teammates, while his working class fans walk away in disgust. Even more importantly, his real team needs to see him take on the big boys… and soon.

There are times when political leaders have to admit a mistake and change a position. This is not one of those times. Obama was right a year ago. As Leopold points out, there are other, less dangerous ways to get the needed revenues. — ways that don’t break such a clearly-stated pledge and that keep faith with working people. Entertaining the notion that it would go unnoticed is asking for trouble. This trial balloon needs to sink. There are plenty of alternatives. He should pick one — or more — and protect his integrity.

One comment on “Obama’s Cred Tested on Taxing Health Benefits

  1. unclebilly on

    As a union member, I always understood that my health benefits were part of my compensation package but fortunately exempt from tax. In the view of my non-union friend, that was unfair, but “life is unfair.” That’s the remark of defender of privilege.
    If we (Americans) want universal health care, the money must come from somewhere. I hope we can disconnect medical care from employment. That will inevitably happen. The various interests in this issue can’t say, “stick the other guy”. $3.6 trillion is a big pile of money. I feel that we can well afford a generous contribution to our fellow citizens. After all, aren’t we union folks supposed demonstrate Solidarity for all workers?


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