Clinton considers sales tax Levy would finance new health plan

April 15, 1993|By John Fairhall and Carl M. Cannon | John Fairhall and Carl M. Cannon,Washington Bureau

WASHINGTON -- In a sharp reversal of position, Clinton administration officials said yesterday they are considering a national sales tax to finance health care reform.

White House communications director George Stephanopoulos cautioned that President Clinton had not made a decision and that a variety of financing sources were being considered by the health care reform task force headed by his wife, Hillary Rodham Clinton.

Lawmakers predict that a national sales tax would face strong opposition in Congress, making it unlikely that Mr. Clinton would risk derailing his health reform package by proposing such a levy. The president has already included an energy tax and other new levies in his economic program and is acutely aware of congressional resistance to more taxes.

But one White House official, who asked not to be identified, indicated last night that the tax is being seriously considered. This official said that the tax has been "discussed in the president's presence" and suggested that it will be presented to him as an option.

Two months ago, the president dismissed the idea of a "value added tax" -- which could be added to the prices of consumer goods like a sales tax, or be paid by manufacturers who would probably pass the cost to consumers.

"It is not now under consideration. If we start considering it, I'll tell you," Mr. Clinton said at a town meeting in Ohio when a woman asked him whether he had considered a value added tax in connection with his economic program.

At that time Mr. Stephanopoulos reaffirmed the president's position, saying that a value added tax "will not be in" Mr. Clinton's health care plan, due to be presented to Congress next month.

But yesterday the administration started sending a different signal. Health and Human Services Secretary Donna E. Shalala said in an interview in USA Today that "certainly we're looking at a VAT."

And Alice Rivlin, deputy director of the Office of Management and Budget, told the National Association of Manufacturers yesterday that a general sales tax "is clearly a possible candidate."

She said it was clear that extending health care to the 35 million uninsured Americans was "going to take some more resources and a VAT [value added tax] or a general sales tax has a good deal to recommend it, especially to an economy that wants to emphasize investment . . . and therefore the notion that you tax consumption makes sense."

But Ms. Rivlin added that such a tax falls hardest on the poor and "has to be offset or designed in some way that it is not too painful to the lowest-income groups."

Mr. Clinton has publicly embraced only one health reform-related tax, an increased federal levy on tobacco products. Members of the task force's working groups, which meet in private, have reportedly been considering such ideas as a tax on employee health benefits and a tax on the health industry.

"The task force has looked at a number of different options," Mr. Stephanopoulos said yesterday, adding that it is "casting a very wide net" in considering ideas. The plan will guarantee every American a basic health benefits package and lay out the means to pay for it.

"They have not made any decisions yet," he said. "The president has not made any decisions yet."

As Mr. Clinton tries to fulfill his promise to guarantee every American health insurance, his task force has estimated that it could cost $30 billion to $90 billion a year, a price tag that tobacco taxes alone could not cover.

To reduce the financial burden, the administration plans to phase in universal health insurance and another promise Mr. Clinton has made -- access to long-term care, which is very costly.

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