Reid May Pay For Reform With Medicare Payroll Tax On Capital Gains

There is some good news and bad news today on how Harry Reid plans to pay for health care reform. It looks like instead of increasing the Medicare tax for people making over $250,000 (as was reported earlier), Reid is thinking about applying the Medicare tax to those individual's capital gains. This seems like a smart way to raise money and should be a relatively easier sell, as tax increase go. It could be framed as a tax fairness issue. “Why do working class people pay Medicare payroll taxes on their money, but the traders on Wall Street don't?”

One new idea that’s “in play” is to apply Medicare taxes to capital gains earned by wealthy Americans, Orszag said. That would allow lawmakers to make up some of the money lost by scaling back a proposed levy on high-end insurance plans.

Aides to Senate Majority Leader Harry Reid have sought input on the idea from staffers for senators such as Budget Committee Chairman Kent Conrad, a North Dakota Democrat, and Olympia Snowe of Maine, the only Republican senator to vote for the legislation, according to two congressional aides who spoke on condition of anonymity.

The bad news is the Reid is consulting with Olympia Snowe on the matter. Olympia Snowe has terrible ideas that she is demanding be part of health care reform. She simply will not support smart health care reform. If Reid is consulting with her to get her back on board, then he is presumably still thinking about going with a trigger. That would be very bad news. Progressives will not react kindly if Reid's back up plan is to gut reform for Snowe's vote. Anything less than using reconciliation to get a strong reform with a real public option would be seen as completely unacceptable.