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Paying for healthcare overhaul may fall unevenly on states

States such as New York are most likely to pay higher taxes to fund expanded coverage but have less to gain, policy analysts say.

July 06, 2009|Janet Hook

WASHINGTON — When Congress decides how to pay for President Obama's signature healthcare initiative, some of his strongest political bastions may be footing a heavy bill.

And in a political irony, states that went for Obama's Republican rival, Sen. John McCain of Arizona, in 2008 are among those likely to benefit most from Democratic healthcare policies.


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Some of the "bluest" states that propelled Obama into the White House are among those most likely to pay more in taxes to fund expanded health insurance coverage and make other changes to the system, analysts say. People in states such as Illinois, New Hampshire, Massachusetts, Connecticut and New York have a higher share of wealthier taxpayers and residents who get generous healthcare plans through work -- and both sets of people may be tapped to raise money for the healthcare overhaul.

Moreover, those states have less to gain from a national effort to expand health insurance coverage because their residents already are more likely to have insurance than are Americans as a whole.

Those conclusions by a range of policy analysts may point to future tension in the healthcare debate: Though battle lines so far have been drawn largely in partisan terms, lurking regional divisions could fracture Congress even further.

"New York is going to be asked to pay a lot more taxes, and people in Iowa and Montana will not," said Robert Blendon, a professor of health policy at the Harvard School of Public Health.

Obama has proposed raising money for a healthcare overhaul by reducing the tax breaks available to high-wage earners, such as those for charitable giving and home mortgage interest. Another idea backed by some Democrats would tax the most generous health insurance policies provided by employers, which some have called Cadillac healthcare plans.

Regional differences may help explain why Senate leaders such as Max Baucus (D-Mont.) and Charles E. Grassley (R-Iowa), who are, respectively, the chairman and ranking minority member of the Finance Committee, are more enthusiastic about taxing employer-provided benefits, while House Ways and Means Chairman Charles B. Rangel (D-N.Y.) is cooler to the idea.

California ranks among the states whose residents would be most likely to pay higher taxes if Obama successfully limited tax breaks for high-wage earners. About 1.4% of taxpayers would face potential increases, according to a study cited by the group Citizens for Tax Justice. That places California among the top 15 most vulnerable states.

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