Obamacare mandate repeal complicates search for common ground on tax reform
Senate Democrats were quick to reject the Republican plan to include the repeal of the Affordable Care Act’s individual mandate in their tax reform legislation, and some House Republicans were not exactly embracing the option either.
On Tuesday night, Senate Finance Committee Chairman Orrin Hatch, R-Utah, released a new version of the tax bill, which Republicans still aim to pass by Christmas. As President Donald Trump has demanded, the legislation now includes undoing Obamacare’s tax penalty for not obtaining health insurance.
Sen. Tim Kaine, D-Va., called the move “outrageous” and said the latest iteration of the Senate GOP bill takes both tax policy and health care policy in the wrong direction.
“What an outrage,” Kaine said. “The right thing to do about health care is embrace bipartisan solutions.”
Republicans use the predicted $338 billion in savings over ten years from the repeal due to fewer people signing up for federally-subsidized insurance to make the corporate tax cut permanent and increase the child tax credit for families. To comply with budget rules, though, most of the bill’s benefits for individuals expire in 2025.
Kaine outlined a number of objections to the legislation in its current form: “The benefits are to the top, not that helpful to middle class and small businesses, busts the deficit, hurts Virginia, and now I get to add to it that it also harmful to people, especially lower income working people, with respect to the health care issue.”
Sen. Richard Shelby, R-Ala., argued it is Obamacare that is hurting working people, and repealing the mandate will bring them relief.
“I voted against Obamacare to begin with,” he said. “I thought it would wreck our health care system and it has basically. The prices have gone up, it doesn’t work. The exchanges are broke. I think we ought to attack it, repeal it every chance we get and this mandate is a central part of it.”
According to Sen. James Inhofe, R-Okla., the mandate remains an important issue to his constituents and this is the best opportunity currently on the table to eliminate it.
“Getting rid of the individual mandate is closer to repealing Obamacare than anything else that is out there right now,” he said. “So do I support it? Yes.”
For Democrats, the changes made to the bill late Tuesday were the latest sign that Republican rhetoric about cutting taxes for the middle class is a hollow attempt to cover up a massive giveaway to the rich.
“I know that the billionaire contributors to the Republican Party are dying for this to come forward because they save tens of millions of dollars each while the middle class may get $100 or $200, although a study showed that 600,000 families in Ohio will pay more income tax, more taxes overall under this health care plan that’s billed as a tax cut,” said Sen. Sherrod Brown, D-Ohio.
The announcement that Republicans are seeking repeal of the mandate dropped a partisan grenade late in an already tense debate, piling a fight over President Obama’s legacy on top of what could be the largest tax reform measure in decades. GOP infighting derailed attempts to deal with repealing and replacing the ACA on its own earlier this year.
While gutting Obamacare would mollify the Republican base, reviving the issue hands Democrats a weapon to energize the progressive activist factions that fought ceaselessly against recent GOP efforts on health care.
“What the Republicans seem to want to do again and again is take steps that would hurt people…,” Kaine said. “It shows what their priorities are and they’re the wrong priorities for Virginians and Americans.”
The individual mandate is one of the least popular elements of the Affordable Care Act, but it is also one that experts say is necessary to ensure that enough healthy people purchase insurance to keep premiums down for others.
The Congressional Budget Office has estimated 13 million more people would go uninsured without the mandate, primarily because they would choose not to pay for it if there is no penalty, but it also projects that premiums would increase by 10 percent for those who do continue purchasing insurance through the individual markets.
Democrats have framed this as taking health insurance away from millions and raising costs for middle class families to pay for a permanent tax cut for corporations. Republicans maintain that most people affected would be giving up insurance by choice, and they argue premiums are already rising quickly as it is.
“We’re going to see whatever little bit of money you have in your right pocket from the tax bill is going to be taken out of your right pocket and even more out of your left pocket to pay for higher health care costs,” Brown said. “So they should be ashamed of themselves.”
On the House side, where the mandate is not currently included in a tax reform bill that could be passed on Thursday, some Republican lawmakers have raised other concerns about making sweeping changes to the tax code.
Despite claims from Republican leaders that all taxpayers would receive a tax cut under their plan, millions of families are projected to face higher taxes than they would under current law. Some provisions, like the permanent repeal of the estate tax, would overwhelmingly benefit the wealthy.
Rep. Tom McClintock, R-Calif., is satisfied with the cuts the House bill provides for corporations and small businesses, but he wants to see a better deal on the individual side.
“There are provisions in there that mean some people are going to get a tax increase,” he said. “The vast majority are getting a tax cut, but in my view, we should leave no taxpayer behind.”
McClintock has offered the House Rules Committee what he believes is a much simpler and fairer solution: leave the current tax structure in place and just cut rates across the board.
“Whatever your deductions, whatever your credits, those are not going to change, but we will be able to produce a one percent reduction in every single tax bracket,” he said. “That would mean an average tax savings of about $600 per family.”
Rep. Chuck Fleischmann, R-Tenn., fully supports the House legislation, which he sees as a step toward “a simpler, fairer, easier-to-understand tax system,” even if there are some provisions he wishes were different. He hopes the Senate can accomplish the same goal.
“What I will do is look at what the Senate does, but I want to make sure that we do what the House bill does, and what that does is it gives hard-working Americans a tax break, it puts more money in their pocket,” he said.
Even before Senate Republicans settled on repealing the Obamacare mandate in the bill, the House and Senate versions diverged widely on some issues. They handle several popular deductions and credits differently in ways that were already going to be tricky to resolve without increasing the cost of the package.
For example, the Senate bill eliminates the state and local tax deduction completely, while the House allows up to $10,000 in property taxes to be deducted. Several House members from high tax states like California and New York are adamantly opposed to taking away a deduction that many of their constituents claim.
Once both sides pass their own versions of the bill, a conference committee will need to cobble together some combination that can win a majority of votes while complying with the arcane rules of the Senate reconciliation process.
“Obviously it takes two to tango,” Fleischmann said. “In other words, the House and the Senate are ultimately going to have to agree on that.”
Although Fleischmann enthusiastically backs the House tax bill, he said he would need to see what concessions both chambers make before deciding if he would accept the final product.
“There are perhaps some things the Senate will take that are in the House bill and vice versa,” he said.
House members were hesitant to take a stance on the mandate issue since it is not an element of the bill they are currently considering and they are unsure what the Senate legislation will ultimately look like. Rep. Darin LaHood, R-Ill., said he is focused firmly on getting the House bill across the finish line, but he is open to considering whatever the Senate comes up with.
“I think there’s a lot of support for comprehensive tax reform,” he said. “I think keeping it the way we have is the best approach but I’m open minded to see what they do.”
“I’ve learned not to predict what my colleagues in the Senate are going to do,” said Rep. Will Hurd, R-Texas.
However, Hurd added tacking on the mandate repeal would not necessarily make the bill harder to pass if it is accompanied by other provisions that help stabilize the insurance market or decrease costs.
“We’re close to the end but there’s still a lot of legislating that has to happen,” he said.