Dems Target High Earners to Fund Health Plan

WASHINGTON -- Senate Democrats are revisiting proposals to raise taxes on high-income people to help pay for an overhaul of the health-care system.

The main proposal getting renewed attention is one by President Barack Obama that would limit the federal tax deductions for higher-income families for mortgage interest and other widely claimed purposes, said two senior Senate Democratic aides.

The development reflects a hardening of partisan lines in the effort to forge a health-care bill. Raising taxes on the wealthy was regarded as a virtual deal-breaker for Senate Republicans engaged in negotiations over the spring and summer. So Senate Democrats steered clear of such an approach.

"Bluntly...the idea of getting Republicans on board [a health-care overhaul] is becoming much more fantastical, so some ideas that were jettisoned for that reason are coming back," said one aide.

Targeting the rich also conflicted with Finance Committee Chairman Max Baucus's hopes of taxing the most costly employer-based health plans as a way to reduce overall health-care spending. But many Democrats are losing hope that Baucus's bipartisan negotiations will produce a deal, so they are beginning to plan for a bill crafted by Democrats. A spokeswoman for Baucus (D., Mont.) said his committee is still pursuing a bipartisan bill.

Placing much of the burden of a health-care overhaul on higher-income earners is likely to face political hurdles of its own, particularly among moderate Democrats. And limiting the value of deductions for higher-income earners could run into opposition with some interest groups, such as the real-estate industry.

Obama had originally proposed capping the value of itemized deductions at 28% of the total claimed for families making more than $250,000, as a way to help pay for a health-care overhaul. If Senate Democrats decide to include the president's idea in a health bill, the actual cap could be somewhat more generous to taxpayers -- potentially as high as 35%, said the Democratic aides.

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