(Bloomberg) Senate Republicans dropped efforts to eliminate three Obamacare taxes on the wealthy in their latest health-care bill—but the party may revive that push in a tax-overhaul plan later this year.
House Speaker Paul Ryan told reporters Thursday that if a new health-care law is enacted that keeps the Obamacare taxes for the wealthy in place, Republicans may use tax legislation to repeal them. Enacting a tax overhaul is one of the GOP’s major goals for this year.
The revised Senate GOP health-care measure released Thursday keeps Obamacare’s 3.8 percent tax on net investment income and a 0.9 percent Medicare surtax, both affecting families who earn at least $250,000 a year. It also retains a tax limit on health-insurance executives’ pay, allowing companies to deduct no more than the first $500,000.
"One of the taxes that affects the tax on capital income is something that is a critical part of tax reform itself," Ryan of Wisconsin said. "Other taxes that affect health care, like the HIT tax and those taxes, those we see as part of Obamacare," he said. HIT is a tax on health insurance.
That’s a shift from Ryan’s statement in March that "Obamacare taxes will stay with Obamacare," suggesting no separate effort to repeal the taxes if Congress were unable to enact a new health-care law.
Democratic Talking Point
The original version of Senate Majority Leader Mitch McConnell’s health-care bill would have repealed the three taxes, as did the Obamacare-repeal measure passed in May by the House. Keeping them could undermine one of Democrats’ major talking points against the bill: that it’s a big tax cut for the rich.
The three taxes on the wealthy would raise $231.3 billion over a decade, according to a report by the nonpartisan Congressional Budget Office evaluating the prior Senate bill. That extra money helped McConnell add $70 billion in insurance-market stabilization funds and $45 billion for opioid treatment, in the hope of winning over moderate Republican holdouts.
The updated Senate GOP plan would scrap other major Obamacare taxes that are related to health care.
"The taxes that will be repealed are all the taxes that have been driving up the cost of insurance," said Senator John Barrasso of Wyoming, the fourth-ranking Republican.
The bill would end the health-insurance tax and an excise tax on tanning services, both starting in 2017; as well as a sales tax on medical devices and a fee on prescription drugs, both starting in 2018. Those and other taxes to be repealed would have raised about $200 billion over a decade. The plan would delay the so-called Cadillac tax on high-cost health insurance plans to 2026.
The GOP bill would, in effect, repeal the requirement that most individuals obtain health care and that large employers provide it to their workers, by eliminating the tax penalties for noncompliance.
The move to keep the investment tax is not sitting well with Grover Norquist, the anti-tax activist.
“All Obamacare taxes should be repealed," he said in a statement. "Given the most recent language leaves some of the taxes in place, it is important for Senate leadership to make it clear that those taxes will be abolished in tax reform this year."
It’s unclear whether the Senate GOP bill will move forward. Soon after its release on Thursday, Senators Susan Collins of Maine and Rand Paul of Kentucky said they would vote with Democrats to block it from coming up for debate next week. McConnell can’t afford to lose any more Republican votes amid united Democratic opposition.
—With assistance from Anna Edgerton