U.S. lawmakers weigh beverage taxes in health revamp

WASHINGTON Mon May 18, 2009 3:56pm EDT

Cans of Coca-Cola are seen in Los Angeles July 17, 2008. REUTERS/Mario Anzuoni

Cans of Coca-Cola are seen in Los Angeles July 17, 2008.

Credit: Reuters/Mario Anzuoni

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WASHINGTON (Reuters) - A tax on soft drinks and other sweetened beverages and higher taxes on alcohol are among the options U.S. lawmakers will consider to pay for expanded healthcare coverage, a Senate report said on Monday.

The beverage taxes were among the options outlined in a Senate Finance Committee report that panel members will review in a closed-door session on Wednesday.

Senators will look at a mix of taxes and cost savings to pay for a healthcare overhaul that aims to provide affordable medical coverage for all Americans, including an estimated 46 million who have no insurance.

Wednesday's session will likely be contentious as lawmakers search for politically palatable ways to finance health reform amid soaring budget deficits.

President Barack Obama wants Congress to pass the overhaul by the end of the year. He has called for a $634 billion "reserve fund" in his budget as a downpayment toward expanding coverage to the uninsured.

Many analysts believe the final cost is likely to be much higher. Senate Finance Committee Chairman Max Baucus, and other Democrats, argue that an overhaul of the $2.5 trillion U.S. healthcare system is needed to control soaring costs.

"Without healthcare reform, healthcare spending will reach $4.4 trillion by 2018," Baucus said in a statement accompanying the release of the possible financing options.

The committee is expected to draft healthcare legislation next month with aim of winning Senate passage by August. The House of Representatives is working on a similar timetable.

Raising taxes on sweetened beverages would provide an added benefit in helping to fight obesity, which drives up healthcare costs, the committee report said. The proposal calls for no tax on artificially sweetened drinks.

Another option would raise taxes on all types of alcohol and apply a standard rate. Taxes now are lower for beer and wine, which are based on volume, than for distilled spirits, which are based on alcohol content.

Other options include limiting some of the current federal tax subsidies for healthcare, which amounted to $194.2 billion in 2008. In particular, lawmakers are looking at limiting a tax break for employer-provided health insurance, a proposal opposed by labor unions.

Lawmakers are also looking at cost savings in the Medicare and Medicaid health programs for the elderly and poor, including requiring high-income earners to pay more for their Medicare drug coverage.

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