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."
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