Dems eye expanding Medicare payroll tax

WASHINGTON, Jan. 13 (UPI) -- Democrats seeking U.S. healthcare reform say they're looking at expanding the Medicare payroll tax to cover capital gains, dividends and other unearned income.

The Chicago Tribune reports congressional leaders discussed the idea during five hours of healthcare reform talks at the White House.

House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., attended the marathon session with the five committee chairmen who were chief authors of healthcare bills. President Barack Obama attended but had to leave occasionally to deal with other matters, including the devastating Haiti earthquake.

"Today we made significant progress in bridging the remaining gaps between the two (House and Senate) health insurance reform bills," Obama, Pelosi and Reid said in a joint statement. "We're encouraged and energized, and we're resolved to deliver reform legislation that provides more stability and security for those with insurance, extends coverage to those who don't have coverage and lowers costs for families, businesses and governments."

The Tribune says the Medicare payroll tax could win converts among union leaders who oppose Obama's plan to tax higher-priced insurance policies. The Medicare payroll tax also is seen as a way to improve the program's financial stability by taxing the richest, instead of the middle class, the newspaper said.

Republicans say extending the tax to investment income would hurt the economy.

"If the goal of the congressional Democratic negotiators is to keep the economy in perpetual recession, having the Medicare tax apply to investment is a darn good way to do it," Ryan Ellis, tax policy director for the conservative Americans for Tax Reform, said.

Rep. Robert Andrews, D-N.J., who chairs the health subcommittee of the Education and Labor Committee, said he favors the proposal because it would make the flat-rate Medicare tax more progressive.

"Those who benefit most from increased economic growth are the wealthiest among us,'' Andrews said. "I think it's most fair to ask them to bear the short-term burden of the program."