Oct. 7 (Bloomberg) -- About 3 out of 5 House Democrats say they oppose a Senate proposal to tax so-called Cadillac insurance plans, setting the stage for a clash over a provision that would fund about one-quarter of health-care legislation.

One-hundred fifty-seven of the chamber’s 256 Democrats signed a letter written by Representative Joe Courtney of Connecticut urging Speaker Nancy Pelosi to reject the 40 percent excise tax that’s likely to anchor the tax provisions in Senate legislation.

The Senate proposal “is a non-starter for the supermajority of the House Democratic caucus,” Courtney said at a press conference today. He called the letter “a big warning flag” for congressional negotiators.

The letter puts additional pressure on Pelosi as she searches for votes on the House legislation, which already differs from the Senate approach on such issues as including a government-run insurance option.

The Senate proposal, which Finance Committee Chairman Max Baucus has said was the product of negotiations with Republicans, would impose a 40 percent excise tax on insurance plans valued at more than $8,000 for individuals and $21,000 for families. The thresholds would be higher for retirees over age 55 and workers in high-risk occupations such as mining and law enforcement.

Effect on Firefighters

Harold Schaitberger, general president of the International Association of Fire Fighters, who appeared with House Democrats outside the Capitol today, said the current proposal would increase taxes on unmarried firefighters in New York City.

“This proposal and excise tax isn’t about just affecting those that work for Goldman Sachs at the top of the economic ladder,” he said. “This would affect firefighters all across this nation and other middle-class workers, those who drive Ford F-150s and Chevrolets.”

He urged lawmakers to adopt House legislation to raise taxes on millionaires or a White House proposal to limit tax deductions for high-income filers.

The House legislation would pay for about 40 percent of its legislation with a surtax on high earners, including a special 5.4 percent levy on millionaires.

Rising Surtax

The surtax would begin at 1 percent on incomes between $280,000 and $400,000 for individuals and $350,000 and $500,000 for married couples filing jointly. A 1.5 percent surtax would apply to incomes between $400,000 and $800,000 for single filers and $500,000 and $1 million for married couples. The 5.4 percent surtax would be assessed on every dollar earned above $800,000 for individuals and $1 million for couples.

House Democrats who oppose the insurance-plan tax said today their chief concern is that it will affect more families with modest coverage over time because the levy wouldn’t be properly indexed for inflation.

The excise tax would start in 2013 in the Senate bill and be indexed to increases in consumer prices, rather than the cost of health care, which has been growing at a faster rate.

The levy would result in about 39 million households paying additional taxes of $52.4 billion in 2019, according to an analysis by the Joint Committee on Taxation that was based on an earlier version of the Senate proposal.

When asked whether signing the letter meant the Democrats would vote against broader health-care overhaul legislation if such a tax is included, the Democrats said no.

“I don’t think signing on to Mr. Courtney’s letter indicates you’re not going to vote for something,” said California Representative Fortney “Pete” Stark. Representative Mazie Hirono, a Hawaii Democrat, said called the missive “a letter of persuasion.”

To contact the reporter on this story: Ryan Donmoyer in Washington at rdonmoyer@bloomberg.net;

Last Updated: October 7, 2009 14:16 EDT