This Montana Standard article reporting that 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" has me a little bit confused. Since when is it a choice? Some quick arithmetic. Obama's budget procures $634 billion for health care over 10 years. But they don't pretend that that's full funding. Most experts think health reform will cost almost double that. So the question is where you get $500 billion or so more over the next decade. If you take out the provision limiting -- not phasing out -- tax deductions for the richest Americans, you've just removed a tax change that got you $318 billion. So now Congress needs to find a staggering $818 billion for health reform. You could do that by ending the employer health exemption (which is what's being talked about when you're suggesting taxing health benefits), but you'd have to actually end the deduction, which would make health care seem a lot more expensive for people. And Baucus, in his white paper, expressly forbids that option, saying it "goes too far." Instead, he proposes capping or reforming the exemption. But even a genuinely aggressive reform of the exemption -- and Wyden's proposal to phase out the employer deduction and replace it with a progressive standard deduction is about as aggressive as you get -- is only scored at saving around $200 billion over the course of a decade. That leaves you $600 billion in the hole. And unless Baucus is planning to push a broad tax increase rather than a targeted tax increase, it's hard to see where you get that money.
