THE BLOG
03/18/2010 05:12 am ET Updated May 25, 2011

Americans Really Don't Want the Baucus Insurance Tax

The allegedly centrist Senate Finance health care bill partially pays for reform by taxing expansive insurance plans. The original allegedly left-wing House bill raises revenue with a income surtax on the uber-wealthy. Guess which one is incredibly unpopular with the American middle?

Two polls in two days -- the ABC/ W. Post poll and the USA Today/Gallup poll -- found widespread rejection of the insurance tax, a whopping 61%.

Meanwhile, Gallup found 59% support the income surtax on the wealthiest households. It's pretty clear where the actual political center is.

Yet, so-called congressional centrists are resisting the income tax on the wealthiest and pushing the insurance tax, which would fall on some middle-class households.

Why is this so? (Besides the general political fear of offending wealthy voters in home districts.)

As the Center for Budget and Policy Priorities argues, the tax would drive down the overall cost of health insurance by providing a disincentive to offer expansive insurance plans. CBPP also contends that most households would not end up paying the tax directly, because they would instead get less expensive health insurance, and in turn, higher wages.

But as CQ noted today, employees get health benefits tax-free, while wages are not tax-free. Plus, the increase in wages will be very uneven, and could be used to shift more health insurance costs back onto workers.

Of the $201.4 billion the excise tax would generate, $37.8 billion would come from the excise tax itself. The rest would come from income and payroll taxes generated from higher wages. Workers who receive higher wages would also get more money from Social Security when they retire.

But there are limits to those potential wage gains. They may vary by industry and region, depending on competition for workers. And, because many high-premium health care plans have relatively low co-payments and deductibles, employers may get around the excise tax by requiring employees to use some of their after-tax money to pay for health care.

Some folks may come out ahead on this deal, but some won't. The issue may be more complicated than a simple poll question can capturee, but you can't rebut by saying no middle-class families would be adversely affected.

It would be one thing if the insurance tax was the only way to get health care reform. But it isn't.

There more popular ways to save money, like a robust public option.

And there are more popular ways to raise money, like an income surtax on the wealthiest Americans.

Both would be the centrist way to go.

Originally posted at OurFuture.org.