Democrats consider surtax on the wealthy to pay for health care plan

WASHINGTON - An income tax surcharge on highly paid Americans emerged as the leading option Wednesday night as House Democrats sought ways to pay for health care legislation that President Barack Obama favors, several officials said.

As discussed in the tax-writing House Ways and Means Committee, the surtax would apply to individuals with adjusted gross income of more than $200,000 and couples over $250,000, they added.

In addition, key lawmakers are expected to call for a tax or fee equal to a percentage of a worker's salary on employers who do not offer health benefits.

Rep. Shelley Berkley, D-Nev., a member of the panel, said the proposed surtax on high-income taxpayers appealed to her and others as a way to avoid a "nickel-and-dime" approach involving numerous smaller tax increases. She added that other earlier options had fallen away, including an increase in the payroll tax.

Berkley and others cautioned that no final decisions have been made, either by the tax-writing committee or by the Democratic leadership, which hopes to have legislation drafted by Friday and through the House by month's end.

Aside from Berkley, officials discussed the private discussions only on condition of anonymity.

The developments stood in contrast to the Senate, where Democrats edged away from their goal of passing ambitious health care legislation by early August amid heightening partisan controversy over tax increases and a proposed new government role in providing insurance to consumers.

"I think the ultimate goal is to have a bill by the end of this year" that is signed into law by the president, Sen. Chuck Schumer, D-N.Y., said in an interview with The Associated Press.

He said Democrats would make "every effort to stick to the timetable" that included initial Senate action by August.

Separately, Republicans who met with Senate Majority Leader Harry Reid, D-Nev., said he expressed flexibility on the timetable, indicating he was willing to allow more time before legislation is brought to the floor.

The evident slippage coincided with a formal announcement that the nation's hospitals had agreed to give up $155 billion in projected Medicare and Medicaid payments over the next decade, money than can help defray the cost of the legislation the administration wants.

"Folks, reform is coming. It is on track," Biden said at the White House, urging the Senate to enact legislation by the now-imperiled August goal.

Any failure to meet the goal would be a setback - but not necessarily a fatal one - for Obama's attempt to win legislation this year that both slows the growth in health care costs and extends coverage to nearly 50 million Americans who now lack it.

Senior administration officials, including White House Chief of Staff Rahm Emanuel, met with Democrats on the Ways and Means Committee as lawmakers narrowed their options.

Officials who spoke on condition of anonymity said other, smaller tax options remained possibilities, depending on the overall cost of the legislation.

A few lawmakers are still seeking a tax on soft drinks in the private discussions, and there has been discussion of removing the current tax break that drug companies receive for advertising.

The White House expressed its support for another part of the emerging House legislation, noting that the Congressional Budget Office had said planned changes to Medicare would save more than $500 billion over 10 years. A significant part of that money would come from the steep reduction in subsidies paid to insurance companies that offer private Medicare coverage.

But in a letter to key committee chairmen, Budget Director Peter Orszag urged additional cuts in projected Medicare and Medicaid spending, as well as consideration of a plan to give an independent commission a greater role in setting future payments rates for Medicare health care providers.

Controversy dogged efforts in the House, as well, when Rep. Henry Waxman, D-Calif., said he had been assured by the administration that it was not bound by an $80 billion agreement with the pharmaceutical industry that Obama announced with fanfare at the White House last month.

Waxman, chairman of one of three committees with responsibility for the House legislation, did not say if the same were true of the deal with hospitals. He was interviewed by National Journal magazine.

Across the Capitol, it seemed clear the drive to enact health care legislation was entering a new phase in the Senate, where attention has largely been focused for months on efforts by Sen. Max Baucus, D-Mont., to forge a bipartisan agreement within the Finance Committee he chairs.

On Tuesday, the Senate Democratic leadership made it clear it viewed a proposed tax on certain health care benefits as unacceptable, at the same time it relayed word that it favors allowing the government to sell insurance to consumers.

Both those positions appeared to undercut much of the work Baucus has been doing. He has said for weeks that any legislation would call for a tax on certain health care benefits, and Republicans are strongly opposed to the idea of government intervention in the private insurance industry.

Baucus told reporters during the day he was "very sensitive to the various concerns that senators have" on taxing benefits, yet added that "by far a better approach is a bipartisan approach."

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Associated Press writers Ricardo Alonso-Zaldivar and Alan Fram contributed to this report.