Lawmakers reject tax to pay for health reform

WASHINGTON (Reuters) - U.S. lawmakers on Sunday criticized a plan to raise taxes on the wealthy to pay for a $1 trillion healthcare overhaul and warned Congress was unlikely to meet President Barack Obama’s goal of passing the measure by August.

Republican Senator Judd Gregg said finishing a healthcare bill by Congress’ August recess was “highly unlikely” because the Senate Finance Committee had not yet completed a draft. Senator John Kyl, the Republican whip, said there was “no chance” it would be done before the break.

“President Obama was right about one thing. He said if it’s not done quickly, it won’t be done at all. Why did he say that? Because the longer it hangs out there, the more the American people are skeptical, anxious and even in opposition to it,” Kyl told ABC’s “This Week” program.

Obama has made healthcare reform his top legislative priority and hopes to sign the bill in October. The United States spends more than $2 trillion annually on healthcare, twice any other nation, but it ranks worse than most developed countries on measures of health like life expectancy.

Some 46 million are uninsured and have little access to routine healthcare, relying instead on costly emergency room visits.

Committee leaders in the House of Representatives plan to introduce a healthcare overhaul measure on Monday and consider amendments later in the week, even as they search for ways to fund the 10-year program.

Representative Charlie Rangel, head of the House Ways and Means Committee, said the bill would include a tax on Americans earning more than $350,000 per year that would raise $540 billion over 10 years. The tax would begin in 2011 and have higher rates at the $500,000 and $1 million income levels.

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Asked if Obama would support Rangel’s tax proposal, Health Secretary Kathleen Sebelius said the U.S. leader wanted to pay for the healthcare overhaul by finding savings in the system and cutting tax deductions claimed by rich Americans, but he was open to other options.

“President Obama has outlined his preferred payment plans,” Sebelius told CNN’s “State of the Union” program, adding that Obama had found $660 billion in savings within the existing system and proposed to raise another $330 billion by capping the itemized tax deductions of wealthier Americans.

“I think the bottom line is, it’s got to be paid for,” Sebelius added. “We all need to play a role.”

Pressed on whether the president could support Rangel’s approach, Sebelius said, “I think everything is on the table and discussions are under way.”

Representative Eric Cantor, the second-ranking Republican in the House, told the “Fox News Sunday” program Rangel’s bill included an “incredible half a trillion dollar tax on folks making over $200,000 a year.”

Paul Osgood (L) and David Quinly (R) stand among a group of picketers pushing for healthcare reform outside Senator Sam Brownback's office in Overland Park, Kansas, July 9, 2009. REUTERS/Carey Gillam

“Half of those people are the ones making the decision as to whether to hire Americans or not,” he said, asking why the government would make it more difficult for them to hire people now out of work due to the recession.

Senator John Kyl, the Republican Whip, also flatly rejected any such tax increase.

“We’re in a recession,” he told CNN. “It would be a job killer. It would be exactly the wrong thing to do any time, but especially when we’re in the middle of a recession.

Senator Richard Durban agreed, telling ABC’s “This Week” show, “I think we’re going to have a different approach.” He did not spell how he would raise new revenue for the program.

Senator Lamar Alexander said he would favor limiting tax deductions on high-priced employer-sponsored health insurance plans -- so-called “Cadillac” plans. Healthcare benefits for employees are currently tax deductible, and some argue the costliest plans encourage wasteful healthcare spending.

Alexander said he would use the revenue gained from the plan to give money to all Americans to be used toward the purchase of purchase private insurance.

“I’m willing to stop giving tax deductions to people for Cadillac health insurance plans in order to give everybody a chance to buy their own health care insurance and not add a penny to the debt. I think that would be a good way,” Alexander said.

Democratic Senator Debbie Stabenow rejected that approach, telling CNN, “The one thing that is off the table is taxing employee benefits.”

Editing by Cynthia Osterman