Baucus: Tax Health Benefits

By Beacon Staff

HELENA – Sen. Max Baucus says he’d prefer funding health care reform by taxing people’s health benefits rather than phasing out tax deductions on the richest Americans.

Baucus, D-Mont., is chairman of the Senate Finance Committee, a powerful position as the Obama administration begins to focus on health care reform.

Currently the portion of health benefits covered by a person’s employer is tax-free income. Baucus said last week that taxing those benefits should be considered.

Asked why Baucus favors taxing health benefits instead of increasing taxes for the wealthiest of Americans, spokesman Ty Matsdorf said Baucus would prefer “to try and first pay for health care reform with health care dollars.”

Yet Matsdorf said the policy wouldn’t necessarily hit lower- and middle-income Americans.

“The Finance Committee will be keenly aware of how any policy will affect lower- and middle-income workers,” Matsdorf said.

Still, any proposal to tax health benefits is bound to be a hot political potato.

Right now, an employer might cover $8,000 of the cost of a $12,000-a-year health insurance policy. That amounts to $8,000 in untaxed income. The tax break is worth about $245 billion a year nationwide and is the largest single cumulative tax break in America.

Baucus said last week that he favored “limiting or trimming” the tax break to help finance reforms.

“It’s currently too aggressive; it skews the system,” he said.

President Obama has proposed to pay for health care reforms in part by phasing out certain income tax deductions for those earning more than $250,000 a year. Baucus has told Obama he doesn’t favor that idea.

Matsdorf said the Finance Committee will pursue “consensus, commonsense legislation” taking a number of factors into account.

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