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Unions Fear Health Tax Would Target Middle Class

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DEBORAH AMOS, host:

It's MORNING EDITION from NPR News. Renee Montagne is on vacation. I'm Deborah Amos.

STEVE INSKEEP, host:

And I'm Steve Inskeep. Good morning.

American carmakers have had a rough couple of years, but can take one small consolation: An American car brand is still used as a synonym for high-priced luxury. You can find proof of that in this week's discussions in Washington about health care.

AMOS: Part of the health legislation surround so-called Cadillac health plans. Some lawmakers favor taxing those plans which allegedly spend extra money without improving health that much. Yesterday, union leaders met with President Obama to offer their perspective. The unions negotiated those plans for some of their members.

Here's NPR's national political correspondent Mara Liasson.

MARA LIASSON: The president supports the so-called Cadillac tax that's in the Senate bill, but not the House version. It will be levied on insurance companies that issue high-cost plans - $23,000 and up for a family of four. The tax would help pay for expanded coverage, and it's been hailed by a wide consensus of economists as one of the few reforms in the bill that would actually rein in the cost of health care because it would discourage employers from offering these high-price plans, which experts believe have helped fuel runaway health care spending.

Here's the president in an interview with NPR last month.

President BARACK OBAMA: I think that we can structure something that protects ordinary workers, makes sure that they are getting a great health care plan, but also makes sure that they're not overpaying in a situation where they're just giving money to health insurance companies that instead could actually be going into their pockets in the form of higher salaries.

LIASSON: But unions hate the tax. They say it runs counter to President Obama's pledge not to tax anyone making less than $250,000 a year. And they say the tax could affect the benefits of 25 percent of rank-and-file workers, many of whom bargained away wage hikes in exchange for better benefits.

Here's AFL-CIO president Rich Trumka at the press club yesterday.

Mr. RICH TRUMKA (President, AFL-CIO): But instead of taxing the rich, the Senate bill taxes the middle class by taxing workers' health plans - not just union members' health care plans. In fact, most of the 31 million uninsured or insured employees who will be hit by the excise tax are not union members.

LIASSON: White House aides suggest that the president would be open to discussing changes, maybe adjusting the level at which the tax kicks in or offering a longer exemption for existing union contracts. But there was another message delivered by the unions that went beyond the policy differences over how to pay for a health care overhaul.

Steve Rosenthal is the former political director of the AFL-CIO. He worries about what happens politically when union members are disillusioned with Democrats. And they are disillusioned today, Rosenthal says, because of the Cadillac tax and the fact that a bill making it easier to organize workers, the Employee Free Choice Act, still hasn't come up in the Senate.

Mr. STEVE ROSENTHAL: The union vote is really critical in - particularly in mid-term elections. And if you look at the numbers of the states that are battleground states in 2010 - places like Ohio and Pennsylvania and Illinois and Missouri and Michigan - certainly, these are all states where the union vote is significant, and by that, I mean anywhere from 25 percent of all the votes cast in these states, in some cases up to 37 percent. In 1994, we saw what happened when union members stayed home.

LIASSON: At the press club, Rich Trumka delivered an even sterner warning. He said no matter how hard union leaders may work this year for Democratic candidates, it may be hard to get their rank-and-file to follow them, the same problem Democrats faced in 1994.

Mr. TRUMKA: We swallowed our disappointment and we worked to preserve a Democratic majority in 1994 because we knew what the alternative was. But there was no way to persuade enough working Americans to go to the polls when they couldn't tell the difference between the policies of the two parties. So politicians who think that working people have it too good are actually inviting a repeat of 1994.

(Soundbite of applause)

LIASSON: At the White House, Press Secretary Robert Gibbs dismissed that scenario.

Mr. ROBERT GIBBS (White House Press Secretary): I think working men and women in this country will be fully motivated in 2010 about the choices that they have in front of them.

LIASSON: But labor leaders and other Democrats fear that even though working men and women may decide they prefer the president and his party, they won't be enthusiastic enough to work hard for Democratic candidates or even turn out to vote for them.

Mara Liasson, NPR News, the White House. Transcript provided by NPR, Copyright NPR.

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