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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

Is Tax on Health Benefits a ‘Poison Pill’?

A just-out WaPo-ABC News poll reveals that the ‘public option’ for health care reform now wins a “clear majority” (57 percent) of the public, according to a report in today’s Post by Dan Balz and Jon Cohen. However, the poll also brings signs of trouble for the proposal to tax the so-called ‘Cadillac’ health care benefits, as Chen and Balz report:

But if there is clear majority support for the public option and the mandate, there is broad opposition to one of the major mechanisms proposed to pay for the bill. The Senate Finance Committee suggested taxing the most costly private insurance plans to help offset the costs of extending coverage to millions more people. Sixty-one percent oppose the idea, while 35 percent favor it.

If Democratic lawmakers needed another reason to be skeptical about taxing health care benefits, unions are fiercely opposed to the idea. As Jeff Crosby put it in his AFL-CIO blog:

Vincent Panvani of the Sheet Metal Workers (SMWIA) warns:If any of these Democratic Senators vote for this, they’ll be out in 2010, and it will be used against Obama….[Y]ou’re taxing the middle class. Teamsters President James Hoffa calls taxing health care benefits “the poison pill that will kill reform.” The Laborers have attack ads at the ready…We have to say, right now, that we will kill any effort to tax our benefits as yet another transfer from our pockets to the health care profiteers.

Perhaps there is a income line that can be drawn to protect union workers from having their hard-won health benefits being taxed, while making those at higher income levels pay their fair share. Democratic leaders need to be very clear and unified that union benefits be exempted and only the wealthy, if anyone, will have their health benefits taxed. This ought to be doable, and most of the revenue shortfall should be made up with tax hikes on unhealthy substances like tobacco, liquor and soft drinks.

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