Politics & Policy

Patriot Games

High taxes are right for our country -- but not for unions?

On the campaign trail, vice-presidential candidate Joe Biden was fond of saying “It’s time to be patriotic” when asked about his running mate’s plan to let certain of the Bush tax cuts expire. But when the Senate passed a health-care bill that raised taxes on generous health benefits — the kind that unions have acquired for their members through years of collective bargaining — union backers in the House brought the process to a halt. The Democrats are usually in favor of higher taxes, unless their most important constituent group is being asked to pay them. Remarkably, the party has put the future of its health-care overhaul in jeopardy to protect organized labor from a tax hike.

The Democrats’ defense of the president’s proposed “reconciliation sidecar” is that it is only a package of minor “tweaks” and “fixes” that, but for the election of Scott Brown and the threat of a Republican filibuster, would have been ironed out in conference committee. This euphemistic language obscures the fact that the only “fix” that matters (other than the language on abortion — more on that later) is the one that delays the implementation of the tax on so-called Cadillac health-insurance plans until 2018. Union opposition to the tax is the only reason a reconciliation bill might be necessary — a look at the other “tweaks” in the president’s reconciliation proposal illustrates why. None even came close to generating the kind of opposition in the House that the Cadillac tax did.

#ad#For instance, one tweak that’s gotten some attention is the proposal that would “fix” the Cornhusker Kickback by applying it to all 50 states. (The Cornhusker Kickback is a chunk of extra Medicaid money for Nebraska, put in to sway Nebraska Democratic senator Ben Nelson.) “Part of the Obama rhetoric on reconciliation is, hey, in the process some bad things got in here, whether it’s the Cornhusker Kickback or the Gator-aid, you know, pick your poison, and we need to take those things out,” says one House GOP aide. “But that’s just cover,” he says, for circumventing regular order to take out the Cadillac tax.

Democrats wouldn’t need to use reconciliation just to take out the Cornhusker Kickback, he explains: It is very unpopular, and a bill that removed it would be unlikely to face a filibuster. But the Cadillac tax enjoys slightly broader Senate support because it is one of the few proposals on the table that would actually control health-care costs. (It would achieve this by discouraging spending on benefits, which are currently untaxed, and encouraging businesses to increase wages instead.)

For more evidence that the Cadillac tax is at the heart of the Democrats’ reconciliation strategy, look no further than their pre-Massachusetts attempt to carve a special loophole in the tax for health plans that were negotiated through collective bargaining. Scott Brown’s victory scrambled the Democrats a bit, and the president’s latest proposal has toned down the nakedly obvious special-interest favoritism of the original deal by delaying the implementation of the Cadillac tax for all health-care plans, not just union ones. But Obama still needs the bill to achieve “deficit neutrality,” so he needs someone else to step up and show some patriotism: His new plan would replace the lost revenue by increasing taxes on that apparently inexhaustible source of funds, the family making over $200,000 a year.

Talk of House Democrats’ recalcitrance has tended to focus on the abortion issue, which has indeed become the biggest roadblock for Speaker Nancy Pelosi as she tries to get the bill across the finish line. But that has nothing to do with reconciliation. “Let’s say abortion was the only problem with the bill: That can’t be solved in reconciliation,” the GOP aide says. Provisions regarding the federal funding of abortions are not usually allowed in reconciliation bills because their budget effects are incidental to their policy effects. “So the only solution there is to do a third bill.” But a third bill on abortion would face a difficult road through the Senate, and Rep. Bart Stupak (D., Mich.), who is leading the charge on this issue, has said he will not vote for the Senate bill on the premise that a third bill might pass.

This would seem to be an insurmountable obstacle to the legislation’s passage, but Pelosi might still be able to cut some sort of deal with pro-life Democrats. One, two, three separate bills? Every available option is in play. But let’s not forget why the Democrats are pursuing reconciliation in the first place: Obamacare necessitates a higher tax burden, and the unions don’t want to pay their fair share. Isn’t that unpatriotic?

— Stephen Spruiell is an NRO staff reporter.

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