Plans to tax wealthy appear in flux

House and Senate negotiators working on President Barack Obama’s health overhaul bill appear likely to drop a proposed income tax increase on high-wage earners and possibly jettison a requirement for large businesses to offer coverage to their employees, Democratic officials said.

Negotiators are considering extending the Medicare payroll tax, which now applies only to income from wages, to cover some of the investment earnings of couples making more than $250,000 a year, and individuals earning above $200,000. That could make up lost revenue from dropping the high-wage income tax and scaling back a proposed tax on high-value insurance plans, which is strongly opposed by organized labor and House Democrats.

The officials spoke on condition of anonymity, saying they were not free to disclose details of the negotiations.

The negotiators also are discussing a hybrid of a proposed national insurance exchange contained in the House bill and the state-by-state approach favored by the Senate. House Democrats are pressing for a national system to apply pressure to the insurance industry.

These officials also said key lawmakers and the White House were hoping to include more money to protect state governments from the cost of an expansion of the federal-state Medicaid insurance program for the poor.

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