Senate Unlikely To Embrace House Surtax On High Incomes

WASHINGTON (Dow Jones)--The U.S. Senate is not likely to embrace a surtax on wealthy households to fund an overhaul of the health-care system as the House of Representatives is set to propose, senators said Monday.

"I don't think that's the direction that's being taken," Sen. Kent Conrad, D-N.D., said after a Senate vote Monday. "In the search for alternative means of funding, those things that are more controversial are losing altitude."

Senate Finance Committee members are debating how to raise about $300 billion over 10 years to help pay for a $1 trillion health-care re-write.

Sen. Richard Durbin, D-Ill., the Senate's second-ranking Democrat, also said Monday on MSNBC that the Senate would take a different approach to the surtax proposed by the House.

The House is readying legislation, to be unveiled Tuesday, that would impose a surtax on families with income above $350,000, raising more than $500 billion to fund new health benefits.

But Republicans are already pouncing on that plan, saying that it would hurt small businesses already buffeted by the recession.

"This is the problem when you spend over $1 trillion to give taxpayer-funded insurance to illegal aliens and people who already have private health insurance. You have to raise massive new taxes that, despite unemployment nearing 10%, hit hard small businesses and their employees," said Rep. Dave Camp of Michigan, the senior Republican on the House Ways and Means Committee.

Meanwhile, the White House Monday stepped up the pressure on Capitol Hill Democrats to push a health-care bill through.

"The urgency barometer is going up," Senate Finance Committee Chairman Max Baucus, D-Mont., said after meeting with President Barack Obama and Democratic congressional leaders at the White House.

Asked about whether the Senate would back the House surtax plan, Baucus said only, "The House is going to do what it thinks is best, and we in the Senate are going to enact what we think is best." He added that proposals for a surtax have not been ruled out of the discussion in the Senate.

Baucus and a group of Finance Committee members are near agreement on some issues of a health-care plan, but have been unable to reach agreement on how to pay for the plan. They are seeking a deal on provisions that would raise $300 billion, after Senate Democratic leaders nixed a proposal to limit the tax exclusion for employer-provided health benefits.

Former Sen. John Breaux, D-La., now a lobbyist with the Breaux-Lott Group, said in an interview Monday that Senate leaders should reconsider that course.

"Everybody wants the most health care they can get at the cheapest possible price, but there's no more free lunches here," he said.

The idea behind limiting the tax exclusion is "if you want a plan that allows you to go to a health spa once a month, you can go ahead and get it, but the taxpayers do not have an obligation to help you pay for it," Breaux said.

Breaux was part of a tax-reform panel under President George W. Bush that in 2005 recommended a capping the tax exclusion at the average benefit level for federal employees.

He said Democrats would be wise to look for revenues in the health-care system, and save the surtax proposal for future priorities like energy legislation and expiring tax cuts. "There are going to be an awful lot of quote-unquote opportunities to raise revenue. What are you going to have left to pay for other programs when you need it?" Breaux said.

-By Martin Vaughan, Dow Jones Newswires; 202-862-9244; martin.vaughan@dowjones.com