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Union members represent one of the biggest and most powerful Democratic constituencies and their support of any health care reform proposal is viewed as essential to getting a bill passed in Congress. So far Big Labor is all for Obamacare, the SEIU even sent bouncers to some of the town hall events to beat up on some of the anti-Obamacare protesters at the events. Of course when some of the burden of paying for state controlled health care is placed on the Unions, they begin to fight. And they are already beginning to fight against one element of the Baucus bill.

To help pay for the plan the bill calls for a tax on those who have “Cadillac” Health insurance (high-end) plans. Union health plans are among the most high of the high-end plans. So the Unions are fighting back by getting House Democrats to lobby against this provision.

Labor Unions Battle High-End Policy Tax

By SEAN HIGGINS, INVESTOR’S BUSINESS DAILYPosted 10/07/2009 07:20 PM ET

Prodded by Big Labor, House Democrats are rising up against Senate Democrats’ efforts to pay for President Obama’s health care overhaul in part via a tax on high-end insurance plans.

A total of 157 House Democrats — over 60% of the party’s 256-member caucus — sent a letter to Speaker Nancy Pelosi, D-Calif., Wednesday announcing their opposition to the tax.

Rep. Joe Courtney, D-Conn., who organized the petition, said the tax would hurt too many middle-class people in addition to the wealthier people it is intended to hit.

“This would have an impact far wider than just the Paris Hiltons of the world,” Courtney told reporters Wednesday.

Their move creates the latest snag in the already-troubled efforts to pass a health care bill this year. Democratic leaders are struggling to balance various factions in crafting legislation. Now Big Labor is making its demands as well.

The Senate Finance Committee, led by Sen. Max Baucus, D-Mont., last week included a 40% tax on insurance plans that would cost families more than $21,000 a year or individuals more than $8,000. The threshold would increase by 1% above inflation each year.

The thresholds would move to $26,000 and $9,850 respectively for people more than 55 years old and those in high-risk professions.

The tax would fall on insurers, but they would almost certainly pass that on to customers in the form of higher premiums.

Baucus adopted the excise tax as part of the overall effort to keep the bill deficit-neutral, a vow President Obama has made and repeatedly reaffirmed.

The tax would raise $201 billion over 10 years, the Congressional Budget Office said Wednesday. Without it, the Baucus bill would boost the deficit by $120 billion.

But Big Labor has cried foul and is lobbying hard against it. Gerry Shea, the AFL-CIO’s top expert on health care policy, says such taxes would hit the plans obtained by union members via collective bargaining.

Union members gave up wages to get broad, comprehensive health care plans, Shea says. They don’t deserve to be taxed for that now, he argues.

“There are a lot of ways to pay for health reform — fairer and better ways — than asking people of moderate incomes to pay for it this way,” Shea told IBD, citing Obama’s earlier, now-discarded proposal to limit itemized tax deductions.

“The fact that they are doing it totally through this excise tax just seems totally unfair,” Shea said.

To drive that point home, the AFL-CIO leadership engaged in a lobbying blitz this week on Capitol Hill. The leaders of 100 unions descended on D.C. to talk to lawmakers about health care.

An aide to Courtney said his office had been talking with unions on the petition. By Wednesday, 61% of House Democrats had signed on.

“I represent Las Vegas, which is a working town and it is a union town,” said Rep. Shelley Berkley, D-Nev. “We’re talking about hundreds of thousands of employees on the Las Vegas valley. They sacrificed wages to get good health benefits. We should not turn around and tax those health benefits.”

No effort was made to recruit Republicans to oppose the tax. The Courtney aide said it seemed beside the point since the health care bill has become solely a Democratic effort.

The House Democratic leadership has sent mixed signals. Late last month, Speaker Pelosi indicated that she was open to the insurance tax, though that was before the connection to union plans was widely discussed.

Last week, House Majority Leader Steny Hoyer, D-Md., said the leadership was still weighing options on paying for the overhaul and had not yet come to a decision.

The tax has attracted Senate critics, too. Sen. John Kerry, D-Mass., plans to offer an amendment on the Senate floor to minimize its effect.

The amendment would raise the tax thresholds and grandfather in plans subject to existing collective bargaining agreements, according to a Kerry aide.

The problem with such changes, says the AFL-CIO’s Shea, is that excluding so many people means the tax won’t bring in much revenue.

“You could set the amount at $40,000 or something like that,” Shea said. “Of course, the problem with that is that you need to make up for that lost money.”

The Senate Finance Committee did not respond to a request for comment.

“The tax will not, it is safe to say, be in the House bill,” boasted Rep. Sander Levin, D-Mich.

Yesterday the CBO predicted that the Baucus bill with be revenue neutral, but it will never be neutral. The Union fight against this tax is only one of the groups fighting against different tax provisions of this bill.There are already efforts to reverse the taxes on scooters and pacemakers. Odds are the special interests will win in their efforts making Obamacare a drain on the American Economy.

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