The Excise Tax Takes Center Stage

| Tue Feb. 23, 2010 12:31 PM EST

Second only to the public option, probably the biggest intra-Democratic healthcare feud is over the excise tax, a tax on high-value healthcare policies that's designed to rein in the "Cadillac plans" favored as tax-free compensation by corporate executives, but that also takes a bite out of the high-end plans negotiated by blue-collar unions over the years in lieu of big raises. President Obama's plan, unveiled yesterday, cuts back the excise tax considerably but doesn't get rid of it completely. So how are liberal Dems likely to react to this? David Corn reports:

At that meeting with columnists a few weeks ago, Pelosi estimated that at most there were 20 Democrats in her caucus who might support an excise tax. The White House appears to be banking on a wholesale conversion of House Dems. But it's unclear whether Obama's alterations to the tax—which also include not counting dental and vision benefits as taxable and easing the tax for firms with higher health-care costs due to the age or gender of their employees—will win over Democrats on the House side. According to White House press secretary Robert Gibbs, the White House did not brief the House Democrats regarding its intentions on the excise tax until after the plan was devised. And during a White House conference call about the overall proposal, economic aide Jason Furman was asked if the administration had attempted to work out an excise tax deal with the House Democrats before releasing the plan. He replied that "everyone would appreciate it" if the Obama proposal led to lower premiums. In other words, no.

If this is true, it's surprising — and a little disturbing. There's no reason the White House has to agree to everything that House Dems want, but it would be nice to think that they at least have an idea of what might be a deal killer and what isn't. My own take is that House Dems got a lot of other things they wanted and that the excise tax has now been so weakened that it's no longer much of a threat. (For one thing, under Obama's plan it won't take effect until 2018. That gives liberals a lot of time to try to kill it entirely.)  Still, I wonder if the folks who have to vote on it agree? And more to the point, I wonder if the White House knows?