President Barack Obama and Congressional Democrats risk a major rift with their union allies if they decide to pay for health care reform by taxing employer-provided health benefits, according to union sources.

An alliance of unions oppose the idea, which is being considered by the Senate Finance Committee. Repealing the exclusion is a potentially rich trove of revenue that, if fully done, could pay for nearly the entire projected $1 trillion to $1.6 trillion cost of a health care overhaul.

White House officials have made clear that the president does not support the idea — but they have left the door slightly ajar to accepting it if needed to seal a deal.

Obama slammed Sen. John McCain (R-Ariz.) during the presidential campaign for backing an end to the exclusion on taxation of employer-provided health benefits, and unions are warning the White House that the president must not reverse himself.

“Look what happened to George [H.W.] Bush … when he said, Read my lips, no new taxes,’ and then changed his mind,— one union lobbyist said.

According to labor sources, union operatives used Obama’s opposition to ending the exclusion to drum up support for him in union households in critical states such as Michigan, Ohio, Pennsylvania and Indiana.

Officials with the Sheet Metal Workers’ International Association were able to deliver to Obama older, more conservative workers and retirees who might have supported McCain because of the health tax issue, according to Vincent Panvini, director of government relations for the union. Internal union polling shows that many workers based their opposition to McCain on his support for taxing health benefits, according to one labor official.

Sources say the White House political shop has been made well aware of union opposition to taxing health benefits, and that this may have helped drive tough statements by Vice President Joseph Biden and Health and Human Services Secretary Kathleen Sebelius over the weekend that were hostile to the idea.

Several labor officials said they expected many unions would oppose the overall health care bill if the new tax was in it as a pay-for. Many, including the AFL-CIO, find it difficult to support a measure that includes a provision many workers find so abhorrent.

About three weeks ago, Panvini and Brendan Kenney, government affairs director for the Air Line Pilots Association, decided to round up signatures for a letter to lawmakers opposing an end to the exclusion.

The response was overwhelming. Within a week, major unions such as the Communications Workers of America, the American Federation of Teachers, the International Brotherhood of Teamsters, the United Steelworkers and more than two dozen other members of the AFL-CIO and Change to Win were on the letter, which was delivered earlier this month to Senators and House Members.

On June 12, the half-million-member Laborers’ International Union of North America, which did not sign the initial letter, sent its own missive to Senate Finance Chairman Max Baucus (D-Mont.), stating that “any plan that taxes these benefits is dead on arrival.—

The AFL-CIO has not issued an official position, but union operatives say it is working behind the scenes to squash the idea.

“This is a line-in-the-sand issue for the labor movement,— Kenny said. “If it does happen, you will see a political train wreck in two years.—

Kenny noted that unions worked to scuttle the tax when it was backed by business groups seeking to avoid an employer mandate during the 1993-94 debate over President Bill Clinton’s health care proposals.

Many unions have already activated members to make phone calls and write letters and e-mails to Members opposing the tax. The activity will be ramped up significantly if the tax is in the bill, and it could include advertising and rallies, union sources said.

“Let me tell you, it would be tremendous,— Panvini said of the opposition from unions if the health benefit tax is included in the bill. “You haven’t seen nothing yet.—