House Dems to tax rich to pay for health care

WASHINGTON — House Democrats plan to pay for a sweeping health care overhaul by boosting taxes on the wealthy.

The taxes will hit households with incomes of $350,000 a year and above.

Ways and Means Committee Chairman Charles Rangel of New York said the tax would raise $540 billion over 10 years.

In combination with cuts to Medicare and Medicaid that would pay for a comprehensive health bill in the range of $1 trillion.

Rangel told reporters of the decision after a day of meetings on President Barack Obama’s top domestic priority.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

WASHINGTON (AP) — President Barack Obama on Friday acknowledged the tough going for health care overhaul as lawmakers struggled with fresh divisions over how to pay for comprehensive legislation.

“We’re closer to that significant reform than at any time in recent history,” Obama told reporters at a news conference in Italy. “That doesn’t make it easy. It’s hard. And we are having a whole series of constant negotiations.”

Conservative Democrats are demanding significant changes before they will support a sweeping health care overhaul, forcing the House to join the Senate in stalling Obama’s top domestic priority. Democratic leaders had set an ambitious timetable for the House and Senate to vote on legislation before the August recess.

Asked if it were “do-or-die” if the timetable slipped, Obama said: “I never believe anything is do-or-die. But I really want to get it done by the August recess.”

The “Blue Dog Democrats” group released a list of demands on the eve of House Democratic leaders’ planned unveiling of their final bill Friday. The bill release was pushed back to next week and Democratic leaders spent part of Friday meeting with the fiscally conservative Blue Dogs to work through their concerns.

“The message that was sent was heard loud and clear,” Rep. Jason Altmire, D-Pa., a member of the group, said Friday. The group’s concerns were the need for more cost containment measures, protections for small businesses and a focus on rural health care.

“We cannot support a final product that fails to” address these issues, members of the group wrote to House Speaker Nancy Pelosi and Majority Leader Steny Hoyer. Opposition from the 52-member group could imperil House passage of a bill.

Before Thursday, delays and internal Democratic disputes over taxes and the role of government had seemed mostly confined to the Senate. A bipartisan deal emerging in the Senate Finance Committee was threatened this week when Senate Majority Leader Harry Reid, D-Nev., and other top Democrats indicated displeasure with the likely payment method, a new tax on health care benefits.

That has left Finance Committee members scrambling for alternative taxes to replace the $320 billion the benefits tax would have raised over a decade. Democrats are considering raising taxes on wealthy investors instead, along with other options, according to officials who spoke on condition of anonymity to discuss private negotiations. The proposal to extend the current 1.45 percent Medicare payroll tax to capital gains earned by high-income taxpayers would bring in an estimated $100 billion over 10 years.

In the House, Democratic leaders had hoped to release an ambitious bill Friday that would achieve Obama’s goals of holding down health care costs and extending insurance to the 50 million people who lack it. Insurers would have to cover all comers, employers would be required to offer insurance and individuals would be required to purchase it, with subsidies for the poor. The tax-writing Ways and Means Committee met throughout the day Thursday to try to finalize plans on how to pay for the plan, with an income surcharge on high-earners of some 3 percent or more emerging as the leading option.

But the move by the Blue Dogs scrambled the equation. It was unclear whether Democratic leaders would be able to satisfy the group’s demands since in some cases they’re far apart from draft language produced by the three House committees writing health legislation.

Also unclear was whether the setbacks would amount to anything more than a brief delay for a bill of enormous complexity and controversy.

With House leaders scrambling to address moderate Democrats’ concerns, business groups increased the pressure on House leaders with letters objecting to pivotal parts of the evolving plans.

The National Coalition on Benefits, representing major business groups and companies like the U.S. Chamber of Commerce and AT&T, told House leaders that business would be hurt by requiring employer coverage of workers, creating a public insurance plan and other proposals.

“The proposal in its current form needs serious revision,” their letter said.

The National Retail Federation wrote leaders of the House Ways and Means Committee to say the House plan would cost jobs and shift health costs to employers.

Associated Press writers David Espo, Alan Fram and Ricardo Alonso-Zaldivar contributed to this report.