Health Care

Who's Paying To Overhaul Nation's Health System?

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One measure of President Obama's commitment to health care overhaul can be found in his budget. The administration's 10-year spending plan includes more than $630 billion to help cover the cost of expanding coverage and improving care.

"This is a significant down payment that is fully paid for and does not add one penny to our deficit," Obama told participants at a White House health care summit Thursday. "And I look forward to working with Congress and the American people to get this budget passed."

But some members of Congress, including Democrats, are challenging the president's plan to raise about half that money through higher taxes on the wealthy.

The president's budget calls for stricter limits on the tax deductions that families making more than $250,000 may take on itemized expenses such as gifts to charity. White House spokesman Robert Gibbs called the proposal a simple matter of fairness.

"A middle-class family donates a dollar to charity, they get 15 cents off their income tax. Bill Gates donates a dollar to charity [and] he takes 35 cents," Gibbs told reporters. "The proposal that the White House has would simply reduce those levels to the same levels that we saw during the Reagan administration."

The White House plan would cap deductions at 28 percent, so in Gibbs' example, Gates would be allowed to deduct just 28 cents from his taxes for every dollar given to charity. The extra pennies from Gates, and other wealthy families, would add up to $318 billion over the next decade. And the president is counting on that money to help fund improvements in health care.

But critics warn the change would discourage the very behavior the tax breaks were set up to promote.

"It will reduce the contributions to charities at a time when Americans are relying more on charitable assistance," said Sen. Pat Roberts (R-KS).

And charitable gifts aren't the only items that would be affected. The White House plan would also reduce the tax deduction that wealthy families can take on their mortgage interest, potentially putting downward pressure on home prices.

"And in the current market condition when we are trying to stabilize housing prices, it's coming at the worst possible time," said Lawrence Yun, chief economist for the National Association of Realtors.

Yun guesses the proposal might shave $4,000 to $6,000 off the price of a $200,000 home.

The administration counters that none of its proposed changes would take effect until 2011, by which time the economy — including the housing market — is supposed to be on the mend. If so, recovery may help offset the drag on charitable giving from the smaller tax breaks in the president's budget.

"You know the best thing that can happen to philanthropy is if we get the economy moving, and income and wealth is growing again," said Patrick Rooney of the Center on Philanthropy at Indiana University. His research suggests that tax breaks are secondary to economic forces in determining the level of charitable giving.

Some charities are torn between their concern about contributions and their genuine desire to see health care revamped. "I think we have to take a look at all the options of how we find a way to do both and that we don't do one at the expense of the other," said Diana Aviv, president of the nonprofit umbrella group Independent Sector.

Max Baucus (D-MT), who is chairman of the powerful Senate Finance Committee, is urging the administration to consider alternative ways to fund its health care plan. Baucus suggested this week that the government start taxing certain gold-plated health benefits that some companies give their employees. Treasury Secretary Timothy Geithner said the White House is reluctant to do anything that might jeopardize employer-based health care. But nothing is off-limits.

"I think the president is correct in saying he's listening to all the ideas that people bring to the table," Gibbs said.



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