An Inside Look at the Senate Finance Committee's Revenue Options

Earlier this afternoon, a Senate source let me look at the revenue options being considered by the Finance Committee. Some of them look pretty good. Some of them seem pretty small. And some seem downright strange.

There are three basic categories of revenue under consideration. The first, and largest, is "health." These are all ways of raising revenue within the health-care system. And they suggest that though a cap on the employer health-tax exclusion isn't being considered as the main funding source for health reform, it's not entirely off the table. One of the options is a cap at FEHBP + 30 percent, which means that the exclusion would cut off on plans that are 30 percent more expensive than the standard plan offered in the Federal Employee Health Benefits Program. This would raise $234 billion over 10 years. Another option is to cap at FEHBP + 60 percent, which would raise $90 billion over 10 years.

The biggest-ticket item under consideration on the health side is an increase of 0.3 percent on the employer and employee Medicare tax. That would raise $275 billion over 10 years. Another option would be to apply the Medicare tax to investment income above the Social Security tax cap. (That seems like a really good idea.) There's also a potential flat tax on insurance companies tied to their number of members or premium payments. That could bring in $75 billion to $100 billion over 10 years. Then there are a couple much smaller revenue options relating to fees on pharmaceutical companies and the medical itemized deduction cap.

The next category is "consumption." The big-ticket item here is a 5 percent value-added tax that exempts food, housing, and medical care. That would raise a trillion over 10 years. It's also a pretty strange idea: If the American people don't want a tax on medical benefits that would fall on only a small portion of the population, are they really going to embrace a national sales tax of 5 percent? Other options in this category include a 10-cent-per-ounce tax on sugar sodas that would raise $105 billion over 10 years, a three-cent-per-ounce tax on sugar soda that would raise $33 billion over 10 years, and a 14-cent-per-ounce tax on beer that would raise $40 billion over 10 years.

The final category is, simply enough, "income taxes." A 2 to 5 percent tax on high incomes -- I don't have the definition of high incomes -- would raise $300 billion to $500 billion. A "millionaires" tax would raise $350 billion. Limiting itemized deductions to 28 percent starting in 2013 (presumably to let the recession close out?) would bring in $267 billion, and 35 percent would bring in $90 billion over 10 years.

There's not a whole lot of analysis to be done on this list of options. I imagine the VAT proposal is pretty unlikely. Most of the rest seem like serious, thoughtful efforts to raise revenue. It's not clear, however, that they'll be any more popular than a more aggressive cap on the employer tax exclusion. And it's a little disconcerting to be this far into the health-care reform process and still be staring at the whiteboard on how to pay for it.

Source: washingtonpost.com