(Bloomberg) — Senate Republicans have tossed a potential bomb in the middle of their tax overhaul bill.
The plan released Tuesday night mixes two red-hot debates by adding a repeal of the Obamacare law’s individual mandate to their tax legislation. While the move will help them meet their fiscal target, it complicates the vote calculations in both chambers and hands Democrats a bumper sticker-ready issue they can use to charge up their base.
The revised proposal "will effectively repeal Obamacare’s individual mandate tax so that we can provide even more tax relief to low- and middle-income families," Senate Majority Leader Mitch McConnell, a Kentucky Republican, said Wednesday.
Getting rid of the requirement that most people have insurance or pay a penalty would knock out a pillar of the Obamacare law. House leaders considered adding the repeal to their bill before ultimately keeping it out of the legislation, which is headed for a final vote on Thursday. It was included in the Senate bill after John Cornyn, the Republicans’ chief vote counter, expressed confidence to colleagues he can secure 50 votes to pass a tax bill with that provision.
But it’s a narrow margin of error. Republicans have a two-vote majority in the Senate, and they tried and failed twice to pass an Obamacare repeal earlier this year.
Now, the three senators who sank the Obamacare repeal, Maine’s Susan Collins, Alaska’s Lisa Murkowski and Arizona’s John McCain, will be back in the spotlight as the tax legislation moves through the Senate.
McCain’s objections to the Obamacare repeal were more about procedure than policy. For Collins and Murkowski, there were concerns that voters would be hurt by dismantling the health-care law.
Collins said adding the repeal would complicate the tax bill “because of the effect on premiums” -- if healthy people forgo insurance, insurers may be forced to raise their prices for policies.
Murkowski said it would help if Congress approved a proposed Obamacare fix sponsored by Republican Senator Lamar Alexander and Democratic Senator Patty Murray, but she made clear that she’s still troubled by the idea of repealing the mandate.
“Are you going to have a situation where your premiums are now going to increase?” she said. “Tell me how that’s making me a happier person in the middle class here. That’s a consideration I think is very real and needs to be weighed.”
McCain so far has signaled open-mindedness on repealing the mandate, saying he’d evaluate the full tax bill.
Senate Finance Committee Chairman Orrin Hatch defended the inclusion of the health-care provision in the tax legislation, arguing Wednesday that “the individual mandate is a tax.” He quipped that Democrats shouldn’t be shocked to learn Republicans oppose that provision.
“Apparently somewhere between the salad course and the entree, it was decided that permanent corporate tax cuts should be paid for, in part, by kicking 13 million Americans off their health care and raising premiums for millions more,” Senator Ron Wyden, the top Democrat on the Finance panel, said at a sometimes tense committee hearing.
Saving RevenueRepealing the mandate is projected to save $318 billion over a decade, revenue Republicans can use to help trim the deficit their tax cuts would cause in the short term and make the tax bill comply with Senate budget rules for the long-term. But it’s also projected to lead to 13 million Americans losing their health-care coverage, according to the Congressional Budget Office.
That has some Republicans in the House as well as in the Senate leery of gutting a central provision of the Affordable Care Act without replacing the law.
Representative Carlos Curbelo, a Florida Republican on the tax-writing Ways and Means Committee, said he wants to keep the mandate out of tax legislation. “To mix the two isn’t smart,” he said in an interview. “I think our tax bill has a lot to offer to every American and American family, and to introduce what is a controversial component would muddy that picture and that message.”
Republican Representative Tom MacArthur of New Jersey said there’s “concern” that including a repeal of the Obamacare mandate could scuttle a tax bill the way it scuttled the GOP’s efforts to overhaul health care.
“It brings the politics of health care into tax reform,” he said. “There’s some danger with that.”
House Ways and Means Chairman Kevin Brady said on Oct. 31 that “what I don’t want to do is to add things that could again kill tax reform like health care died over there.” Shortly after that, President Donald Trump endorsed eliminating the mandate in a tax bill, which he repeated on Monday.
Republican leaders have more room to lose votes in the House than the Senate. There were 20 House Republicans who voted against Obamacare repeal legislation earlier this year. That included moderates who have so far been open to the tax bill, such as Charlie Dent of Pennsylvania, Mike Coffman of Colorado, Jaime Herrera Beutler of Washington and Barbara Comstock of Virginia, who expressed concern about the impacts on the health-care system.
Herrera Beutler said Tuesday night she is “leaning yes” on the House tax legislation, and is not necessarily opposed to repealing the mandate. But she said she would have to evaluate its impacts on the health-care system. The issue represents “a layer of complexity in an already pretty complex code,” she said.
The Senate’s decision to scrap the mandate is part of a deal to hold a separate vote on a package of bipartisan Obamacare fixes negotiated by Alexander and Murray, Republican Senator John Thune of South Dakota said. That may ease some concerns of Republicans who worry about possibly destabilizing the health-care system.
Murray said the Senate action was “the exact opposite of where we should going.” In an emailed statement, the Washington Democrat urged Republicans to “back away from their plan to pay for tax cuts for the rich by spiking families’ premiums, cutting millions of people off of coverage, and injecting even more uncertainty into people’s health care.”
As if on cue, some of America’s biggest health-care players sent a letter urging Congress to keep the insurance requirement in place unless or until lawmakers can enact a larger package of changes to “prevent extraordinary premium increases.”
Overhauling health care in a tax bill could awake a sleeping giant among the progressive voters and industry groups who mobilized to kill an Obamacare repeal but have been less active against tax legislation.
“The #GOPTaxScam is a backdoor attempt to get #Trumpcare passed,” Senate Democratic Leader Chuck Schumer tweeted on Tuesday.
“It makes the numbers look better, but it grossly complicates the politics,” said Stan Collender, a longtime congressional Democratic budget aide who is now executive vice president of Qorvis MSL Group in Washington. “While you can’t underestimate McConnell’s negotiating skills, this is one that has you scratching your head.”