Obama may back taxing health benefits

WASHINGTON, March 15 (UPI) -- The Obama administration may support a move to tax employee health benefits as a way to finance an overhaul of the U.S. healthcare system, sources say.
Support for the idea would represent a turnabout for President Barack Obama, who last year criticized Republican presidential nominee Sen. John McCain of Arizona when he floated a similar idea, calling it "the largest middle-class tax increase in history," The New York Times (NYSE:NYT) reported Sunday.

Such benefits from employers are now tax-free, regardless of how generous they are or how much an employee earns, and any move to tax them would be opposed by union leaders who supported Obama's presidential campaign.

But now, unnamed White House advisers told the newspaper that, while the president will not propose changing the tax-free status of employee health benefits himself, neither would he oppose it if Congress does so.

White House Budget Director Peter Orszag indicated at a recent congressional hearing that taxing health benefits "most firmly should remain on the table," the Times said.

Obama's own idea for paying for reform -- limiting income tax deductions for the most affluent taxpayers -- has encountered flak from congressional Democrats.