The Health-Care Surtax And Its Discontents

Democrats in the House of Representatives released their version of a health-care bill yesterday. While it marks just one phase in the complex legislative process, it's still a signal moment and one that poses opportunities and risks for the Obama administration. On one hand, it's really happening--a bill that could greatly expand health insurance coverage to milllions of Americans who don't have it. On the other hand, the ideal of near-universal insurance comes with a price tag and with a way to pay for it. The House Democrats went with a surtax on the wealthy, as much as a 5.4 percent tax on families making more than $350,000 a year. There's a common sense aspect to this: You want health care. You need the money. It's got to come from somewhere. Why not those who are able to afford it?

The tax would affect individuals making more than $280,000. The Tax Policy Center says that we're talking about 2.1 million taxpayers, a pretty rarified group in a nation of more than 300 million. Still, we're in a nasty recession and a tax hike, reflexively opposed by Republicans even in the best of times, is bound to make some Democrats nervous, too. The Washington Post quotes Sen. Ben Nelson, the moderate Nebraska Democrat, noting that his constituents hope to make that much and won't be comfortable with it. Republicans are quick to point out that a lot of small business owners file their returns as individuals, so that the number includes modest shopkeepers as well as fat cats.

We'll see where all of this goes. The Senate Finance Committee Chairman, Max Baucus of Montana, is working on his own, bipartisan bill. Despite the administration's hope of seeing the committee pass a bill before August, when Congress takes one of its long breaks, that's unlikely.

But we're starting to see the risks for Democrats. Health care that raises taxes on the wealthy will galvanize opposition. That may be a small price to pay for something like universal health care, but it is a price nonetheless.  Until now, because of the recession, the Obama administration hasn't had to come in and raise taxes. They've been able to spend. Now they have to, and that's never easy, even when it involves the rich.

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Matthew Cooper is a managing editor (White House) for National Journal.

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