The Senate Finance Committee voted yesterday to spend $35 billion more on the children’s health insurance program (S-CHIP) over the next five years. All of the Democrats and most of the Republicans on the committee support the move. Bush is threatening a veto; NRO’s editors made the case for one today.

Conservatives opposed to an S-CHIP expansion haven’t united behind an alternative plan. The White House has been pushing hard for the president’s proposal, made earlier this year, to change the tax treatment of health care. This proposal would replace the tax break for employer-provided health care with a flat tax deduction available to individual health-care purchasers, and conservatives think it would go quite far to rationalize the health-care market. The Department of Health and Human Services, on the other hand, is putting more stress on the need for insurance-market reforms. Without a deregulation of the market to allow for cheaper individual insurance policies, the argument goes, the tax deduction won’t offer people much help.

There’s another problem. The administration and its Senate allies are open to modifying the tax proposal to make it better for low-earning workers. The idea would be to offer people a refundable tax credit, not just a deduction, so that people who don’t make enough money to pay income taxes would get the benefit. Grover Norquist, the head of Americans for Tax Reform, is crying foul. He does not mind the elimination of the tax break for employer-provided health care as long as it is offset by a tax cut somewhere else–and he does not believe that refundable tax credits count as a tax cut. So Republicans who support the modified version of this health-care plan would be, in his view, raising taxes–and most of them have signed Norquist’s pledge not to do that.

Norquist says that there is an easy solution: Just throw in another tax cut to the mix. That won’t produce a bill that would be likely to pass this Democratic Congress. But it might give conservatives in Congress a place to go as they try to block S-CHIP expansion.