How to Pay for Health-Care Reform

Democratic leaders are considering raising the Medicare payroll tax and applying it to unearned income such as capital gains and dividends as well as to wages, to pay for health-care reform. The idea, one of a shrinking number of options discussed at a marathon meeting with the White House on Wednesday, could help reconcile the differences between the House bill, which pays for reform with a 5.4 percent income surtax on individuals with more than $200,000 in income, and the Senate bill, which taxes insurance companies offering expensive plans and raises the Medicare payroll tax to 2.35 percent for individuals making more than $200,000. Raising the Medicare payroll tax and applying it to unearned income could help placate unions, which have resisted a proposed tax on Cadillac plans. As an analyst at the nonpartisan Tax Policy Center put it, "It's a very progressive way to raise money," that "would protect union workers. It would definitely target people who are better-off, but it could hit some of the elderly who are relying on savings to get by."