July 7 (Bloomberg) -- Members of the Senate Finance Committee may abandon a plan to impose new taxes on employer- provided health benefits because of overwhelming public opposition to the idea, a senior Democrat on the panel said.

Senator Kent Conrad of North Dakota said that, while the proposal hasn’t been dropped yet, senators working on health- care legislation believe it may be too hard to sell the idea to the public and that they must start examining alternative ways to offset the $1 trillion cost of revamping the system. Panel members have been considering ending a current income tax exclusion for employer-provided health-care benefits.

Conrad, who also heads the Budget Committee, said senators were informed of three opinion polls taken last week that examined public sentiment on health-care reform, and found the tax plan was opposed by some 70 percent of the American people.

“Given input from the polling, given input from our colleagues, I think you’d expect any prudent person would go, ‘Okay, what are our other options,’” he said. “That’s what we’re doing.”

The Finance Committee is working to draft legislation that senators of both political parties can agree to. Offsetting the costs is one of the toughest issues in the talks.

Tax-Code Changes

Conrad didn’t provide details about other tax options that are under consideration. He said they include taxes on the health-care industry and broader changes to the tax code.

Before lawmakers left Washington for the weeklong Independence Day recess, Senate Finance Committee Chairman Max Baucus said a cap on the exclusion would probably be included in his panel’s legislation. The leading option under consideration would tax benefits that exceed 110 percent of the plan offered to federal employees, which amounts to benefits above $17,240 for a family of four.

The benefits-tax idea hasn’t been supported by the White House, although President Barack Obama has said he would consider it. Obama instead has advocated paying for the health- care overhaul by limiting tax deductions for the wealthiest Americans and reining in the growth of medical spending.

Unions have also opposed the idea and have pushed for an exemption for benefits provided in labor accords.

October Deadline

Dropping the offset, however, complicates efforts to draft a measure as lawmakers are also running up against a deadline set by Obama. The president is pressing Congress to send him legislation by October that will expand insurance coverage and slow soaring health-care costs.

Democrats who control Congress are considering a mandate that all Americans have health insurance and a requirement that employers provide health benefits to their workers.

They also want to create an online insurance “exchange” where individuals can buy coverage at lower group rates, and the creation of a new Medicare-like program that would compete against private insurers to provide coverage to the uninsured.

To contact the reporter on this story: Laura Litvan in Washington at llitvan@bloomberg.net

Last Updated: July 7, 2009 16:30 EDT