AP sources: Reid eyes payroll tax hike on wealthy

Majority Leader Harry Reid is considering a plan for higher payroll taxes on the upper-income earners to help finance health care legislation he intends to introduce in the Senate in the next several days, numerous Democratic officials said Wednesday.

These officials said one of the options Reid has had under review would raise the payroll tax that goes to Medicare, but only on income above $250,000 a year. Current law sets the tax at 1.45 percent of income, an amount matched by employers.

It was not known how large an increase Reid, D-Nev., was considering, or whether it would also apply to a company's portion of the tax. President Barack Obama has said he will not raise taxes on wage earners making less than $250,000.

The officials spoke only on condition of anonymity, saying they were not authorized to disclose details of private deliberations.

Reid's spokesman, Jim Manley, declined comment and said the majority leader has made no final decisions and is awaiting detailed information from the Congressional Budget Office about the cost and coverage implications of the proposals he has drafted.

Reid sent his proposals to the CBO more than two weeks ago and recently took the first step on the Senate floor to begin a debate on health care as early as next week.

The House passed its version of the legislation late last week on a near party line vote of 220-215, a victory for Obama as well as his allies in Congress.

In general, the House-passed measure and the one Reid is expected to propose are designed to expand coverage to tens of millions of uninsured, eliminate insurance industry practices such as denying coverage on the basis of pre-existing medical conditions, and slow the overall rate of growth in health care spending nationally.

Reid has been merging bills cleared earlier by two separate committees but has a virtual free hand in the bill he crafts.

On one contentious issue, he has already said his measure will include an option for consumers to purchase health care from the government as a way to create competition with private companies. States could drop out of the system.

The House bill is significantly more generous in providing subsidies to help lower-income individuals and families afford coverage, and Reid is under pressure to find additional financing. Additionally, a Senate Finance Committee-approved proposal to tax very high-cost insurance policies has drawn criticism from organized labor, which wants it either modified or dropped altogether.

The House-passed legislation includes a surtax of 5.4 percent on income above $500,000 for individuals and $1 million for couples, a proposal that has drawn little if any backing in the Senate.

The House's passage of a health care bill was marked by last-minute controversy over abortion, the result of far-reaching restrictions that foes of the procedure succeeded in inserting into the measure. No government-run insurance plan could cover abortions, except in cases of rape, incest or if the life of the mother were in danger. Nor could any health plan provide abortion coverage except for those three exceptions if any of its customers received federal subsidies.

Obama has called for changes to ease the restrictions, and it was not known what the impact of the House-passed bill would have on the Senate. Officials have said Reid was ready to propose that individuals receiving subsidies would be able to buy abortion coverage with their own funds.