Tax debate update: GOP stirs Democrats’ ire with Obamacare idea

(Bloomberg) The Senate tax-writing committee continues hammering out the details of its tax cut proposal on Tuesday, while the House may vote on its bill as soon as Thursday. Here are the latest developments, updated throughout the day:

Hatch Seeks Mandate Repeal, Temporary Cuts (11:03 p.m.)

Senate Finance Chairman Orrin Hatch released his modified tax proposal late Tuesday that would make middle-class breaks and other provisions temporary in a bid to comply with the Senate’s rigid fiscal rules.

The measure would also repeal the Obamacare requirement that individuals have health coverage.

Hatch’s revised plan would sunset key middle-class tax cuts starting in 2026 to comply with Senate rules—including income tax rate reductions, the doubling of the standard deduction and an increase in the child tax credit. It also ends a tax break for partnerships, limited liability companies and other so-called pass-through businesses starting on Jan. 1, 2026. However, the corporate rate cut to 20 percent from 35 percent and international tax-law changes would be permanent.

The measures are intended to ensure the Senate tax bill complies with budget rules that prohibit the legislation from adding to the long-term deficit if it’s passed with a simple majority.

—Sahil Kapur, Erik Wasson and Steven T. Dennis

Thune: ACA Mandate Repeal in Revised Plan (6:15 p.m.)

Senator John Thune, the chamber’s No. 3 Republican, said the repeal of the individual mandate required by Obamacare will be included in the revised version of the Senate GOP tax plan.

Senate Majority Whip John Cornyn is confident the chamber will get the 50 votes it needs to pass a bill, according to Thune. “We wouldn’t have proceeded if Cornyn wasn’t confident he could get to 50,” Thune said.

Senate Finance Chairman Orrin Hatch had said he’d release a revised proposal late Tuesday. That plan will fully comply with Senate budget rules designed to prevent long-term deficits, according to a Senate GOP aide who asked not to be named because the discussions were private. Adding the mandate’s repeal should help in that effort by reducing out year deficits.

Meanwhile, the House Republicans who are responsible for amendments met with GOP leaders late Tuesday afternoon about whether to change the House bill to include the individual mandate repeal also.

Mark Walker, chairman of a large conservative caucus, and a co-sponsor of an amendment to include the Obamacare mandate repeal in tax legislation, attended the meeting. “We’re in the process of seeing what could be done to move it forward,” Walker said. He added the amendment has “several dozen” cosponsors.

Still, the Rules Committee, which is meeting at 6:30 p.m., isn’t planning to add the Obamacare mandate repeal to the House bill Tuesday evening, according to a person close to House GOP leadership who asked not to be named because the discussions were private.

Erik Wasson, Anna Edgerton and Sahil Kapur

GOP Stirs Democrats’ Ire with Obamacare Idea (3:44 p.m.)

Democrats on the Senate Finance Committee objected to an emerging Republican plan to add the repeal of the Obamacare law’s individual mandate to tax overhaul legislation.

The Finance panel’s hearing briefly grew heated as Senator Ron Wyden, the panel’s top Democrat, suggested that it was improper to consider the measure. He asked that the committee recess until Wednesday—and Chairman Orrin Hatch agreed.

“We’ve had it for the day,” Wyden said. “Expect us to be back tomorrow with a lot of questions.”

Senate leaders have said the chamber’s tax writers are considering including the provision in a revised tax bill that’s planned for release later Tuesday.

Eliminating the requirement for individuals to purchase insurance would generate an estimated $338 billion in savings over 10 years—helping tax writers to avoid increasing the federal deficit too deeply with their tax cuts. Those savings would come from reductions in government spending on health-coverage subsidies for an estimated 13 million Americans who would forgo coverage in 2027, according to an estimate from the Congressional Budget Office.

Democrats described the plan as paying for tax cuts by eliminating health coverage.

“In their desperation to secure an ideological trophy, no matter the consequences, Republicans are choosing to pay for corporate tax cuts by raising premiums for middle-class families and ripping away health care altogether from millions more,” Wyden said in a prepared statement. “This is a con job on the American people and proves that Republicans’ only agenda is putting an economic double standard into black letter law.”

Also Tuesday, a coalition of health-care groups urged congressional leaders to maintain the mandate “unless and until Congress can enact a package of reforms” to prevent “extraordinary premium increases.”

“There will be serious consequences if Congress simply repeals the mandate while leaving the insurance reforms in place: millions more will be uninsured or face higher premiums, challenging their ability to access the care they need,” said a letter to congressional leaders from the group, which includes the American Medical Association, the American Hospital Association and America’s Health Insurance Plans.

—Laura Davison, John Voskuhl

McConnell Calls ACA Mandate Repeal ‘Helpful’ (2:54 p.m.)

Senate Majority Leader Mitch McConnell said GOP members are optimistic that including the repeal of the individual mandate imposed by the Obamacare law in a tax overhaul would be “helpful.”

Senate tax writers are considering including the provision in a revised tax proposal that’s set to be released later Tuesday, according to Senator John Thune of South Dakota and Majority Whip John Cornyn of Texas.

“It’s been a subject of discussion,” said Thune, the chamber’s third-ranking Republican leader and a member of the Finance Committee.

The Senate GOP conference discussed adding the repeal of the mandate that all individuals purchase health insurance to the tax proposal during lunch Tuesday. And the Finance Committee discussed the potential inclusion on Monday evening and now wants the full conference to approve the move, said Cornyn.

Making the change would produce an estimated $338 billion in savings over 10 years that would help tax writers meet fiscal targets. Those savings would come from reductions in government spending on health-coverage subsidies for an estimated 13 million Americans who would forgo coverage in 2027, according to an estimate from the Congressional Budget Office.

Including the repeal would allow the bill to become “as pro growth as possible” and ensure cuts are permanent instead of temporary, Cornyn said.

Reopening the politically painful Obamacare debate could cost the GOP crucial votes on a tax bill. A “skinny” repeal of Obamacare that scrapped the individual mandate failed in July to pass the Senate after defections by John McCain of Arizona, Susan Collins of Maine and Lisa Murkowski of Alaska.

McCain said Tuesday he’s leaning toward supporting the Senate GOP tax proposal, but he’ll have to evaluate any attempt to add a repeal of the individual mandate.

Collins said she thought including the mandate repeal would complicate the tax effort and would consider the bill when it comes out of the Senate Finance Committee.

Told Senate Republicans were weighing the idea, Murkowski said tax legislation was “complicated enough.”

Senate Minority Leader Chuck Schumer said the move would be tantamount to taking away people’s health care to give big tax cuts to the wealthy—and predicted it would create problems for the tax effort.

“Thelma and Louise are warming up the car, preparing to drive it over the cliff,” he said.

Republican senators Tim Scott of South Carolina and Pat Toomey of Pennsylvania, members of the Finance Committee, said they would support including the repeal in tax legislation.

Senator Rand Paul also said he’ll push to amend the Senate tax bill to include repeal of the mandate.

“The mandate repeal is a promise we all made and we should keep. It also allows an additional $300 billion+ in tax cuts,” the Kentucky Republican said on Twitter.

Paul said he plans to change the bill to “provide bigger tax cuts for middle income taxpayers.”

Republican leaders aren’t taking Paul’s vote for granted, particularly after he scuttled a last-ditch effort in September to repeal Obamacare, complaining that it didn’t go far enough in slashing the health-care law.

Senator Ted Cruz said Republicans haven’t made a decision on including the mandate repeal in a tax bill, but he supports it as a way to lower middle-class rates and sees a “growing consensus” across the conference to do it.

President Donald Trump has called for repealing the mandate as part of tax legislation, but hasn’t demanded it. House leaders considered adding the repeal of the Obamacare individual mandate to their bill before ultimately keeping it out of the legislation.

The Republican Study Committee, a group of 160 conservative members, is drafting an amendment that would add the repeal of the individual mandate to the House bill before the floor vote expected for Thursday, according to a lawmaker and an aide who have been briefed on the plan.

The RSC amendment doesn’t include a specific proposal for what to do with the savings, the aide said.

Mark Meadows, the chairman of the Freedom Caucus, signed on as a co-sponsor of the amendment, said Ben Williamson, a spokesman for Meadows.

—Erik Wasson, Anna Edgerton, Sahil Kapur, Steven T. Dennis, Laura Litvan and Kaustuv Basu

Thune: Senate Considering Individual Repeal (12:14 p.m.)

Senate tax writers are considering including the repeal of the individual mandate imposed by the Obamacare law into the revised tax proposal set to be released later Tuesday, according to Senator John Thune of South Dakota, a member of the Finance Committee.

“It’s been a subject of discussion,” said Thune, the chamber’s third-ranking Republican leader.

Reopening the politically painful Obamacare debate could cost the GOP crucial votes on a tax bill. A “skinny” repeal of Obamacare that scrapped the individual mandate failed in July to pass the Senate after defection by three Republicans—Susan Collins of Maine, Lisa Murkowski of Alaska and John McCain of Arizona.

Senator Tim Scott of South Carolina, another Republican member of the Finance Committee, said he would support including the repeal in tax legislation.

Senator Rand Paul also said he’ll push to amend the Senate tax bill to include repeal of the mandate.

“The mandate repeal is a promise we all made and we should keep. It also allows an additional $300 billion+ in tax cuts,” the Kentucky Republican said on Twitter. The savings would come from reductions in government spending on health-coverage subsidies for an estimated 13 million Americans in 2027.

He also said he plans to change the bill to “provide bigger tax cuts for middle income taxpayers.”

President Donald Trump has called for repealing the mandate as part of tax legislation, but hasn’t demanded it. House leaders considered adding the repeal of the Obamacare individual mandate to their bill before ultimately keeping it out of the legislation.

Republican leaders aren’t taking Paul’s vote for granted, particularly after he scuttled a last-ditch effort in September to repeal Obamacare, complaining that it didn’t go far enough in slashing the health-care law.

—Erik Wasson and Sahil Kapur

Plan Revisions Coming Later Tuesday, Hatch Says (9:36 a.m.)

Senate Finance Committee Chairman Orrin Hatch said his “modified mark” isn’t ready yet and will be given to lawmakers “later today.”

Members of the panel will be given time to review the changes and weigh in on them during tomorrow’s hearing, according to Hatch.

Senator Ron Wyden, the committee’s top Democrat, blasted the move, saying Republicans are trying to advance a bill in “reckless haste” and that the process “doesn’t resemble the regular order in the finance committee.” He complained that Tuesday’s hearing would be a waste of time since members would be asking questions about a proposal that would change.

—Sahil Kapur

Byrd Rule Rattles Senate As House Nears Vote (4 a.m.)

The House’s chief tax writer says he’s confident its tax bill will pass, but a major challenge continues to loom over Senate Republicans—the Byrd Rule, an arcane measure that says the final bill can’t add to the federal deficit after its first decade in place if lawmakers want to pass it with a simple majority.

The Senate Finance Committee is set to start debating the GOP tax proposal, which is estimated to cost $217 billion in the 10th year, with more red ink in subsequent years. That means there would have to be significant changes to avoid long-term deficits. Orrin Hatch, the panel’s chairman, acknowledged on Monday there’s still work to do. He’s expected to release a modified chairman’s mark on Tuesday that may aim for better numbers.

The U.S. Capitol building stands before sunrise in Washington, D.C.
The U.S. Capitol building stands before sunrise in Washington, D.C., U.S., on Friday, March 24, 2017. House GOP leaders are hurtling toward a vote Friday on their embattled health-care bill without knowing for sure whether they have enough support to pass the measure, after yielding to Trump administration demands to act now. Photographer: Andrew Harrer/Bloomberg

But how the revised version would bridge the gap remains a mystery.

Even Hatch seems unsure: “I know what’s in it but they may change it on me,” he said after his committee recessed Monday evening.

Senator Susan Collins of Maine offered some ideas for changes late Monday. They included setting the corporate rate at 21 percent, not 20, and keeping the current top individual rate of 39.6 percent for married taxpayers filing jointly who earn $1 million or more. The Senate bill proposes cutting that rate to 38.5 percent. The proceeds from those adjustments could go to providing a refundable childcare tax credit or preserving property tax deductions, according to Collins, who cast a pivotal vote to block an Obamacare repeal bill earlier this year.

The Senate proposal would limit its revenue losses in part by delaying a cut to the corporate rate—to 20 percent from 35 percent—until 2019, a year later than the House has proposed. It would also fully repeal all state and local tax deductions. The House wants to retain a break for state and local property taxes, capped at $10,000.

Across the Capitol, House Republicans were upbeat Monday night. Matt Gaetz, a Florida Republican who previously criticized the secret drafting of the bill, praised the way House leaders had educated members about the legislation and said he expects it to pass this week.

“After the cataclysmic stumble on health care I think people really are looking for a way to get to yes on taxes,” Gaetz said in an interview.

The Republican whip team reported that the tally for the tax bill was in a good place on Monday night, according to two House members briefed on the vote counting who were not authorized to speak publicly. Conservatives are mostly on board, and the focus is now on convincing members from high-tax states that the compromise to preserve the deduction for state and local property taxes will be included in the final bill, the two Republicans said.

The House has an easier task though, since it isn’t bound by the Byrd restriction on long-term deficits. As far as Ways and Means Chairman Kevin Brady is concerned, the ball is in the Senate’s court to find a solution.

“I assume the Senate will address it in their process,” Brady told reporters Monday. “At the end of the day the final bill has to comply with those Byrd Rules.”

House and Senate tax writers have been more concerned with meeting the first requirement of the Byrd rule—that the bill stay within the amount allotted in Congress’s 2018 budget resolution: $1.5 trillion. Each version just squeaks by—the House tax bill is estimated to add $1.44 trillion to the deficit, while the Senate proposal would add $1.496 trillion.

“We really haven’t analyzed it in the second decade,” Brady said.

If the Senate is able to fix its Byrd problem and approves tax legislation, the House and Senate versions will have to be reconciled in a conference committee. So eventually, Brady will have to deal with the long-term deficit issue and make sure his members support the potentially painful compromises that would stem the bill’s red ink.

—Sahil Kapur, Anna Edgerton, Erik Wasson and Steven T. Dennis

What to Watch on Tuesday:

• The Senate Finance Committee will begin its markup at 9 a.m. Hatch is expected to introduce his modified chairman’s mark, which could include amendments that have strong support among committee members.

• Potential amendments related to the treatment of carried interest, retirement savings, corporate integration and state and local tax deductions could be introduced.

• House vote count results may emerge along with any minor revisions to the House tax bill. Brady said Monday afternoon he’s confident the chamber has enough Republican votes to pass its tax legislation this week.

Here’s What Happened on Monday:

• Opening statements from Senate Finance committee members, including Senator Ron Wyden, the panel’s top Democrat, who blasted GOP leaders’ process of crafting the bill as a partisan “farce” and labeled their statements about its benefits—including higher wages—as “trickle-down fantasy math.”

• President Donald Trump repeated his call for Congress to repeal the Obamacare law’s requirement that individuals purchase health insurance—and said the resulting savings could help offset a rate cut for top earners.

• The Congressional Budget Office said the Senate bill would increase the federal deficit over 10 years by $1.7 trillion, including increased debt service but not any macroeconomic effects from the legislation.

• A nonprofit group that spent more than $18 million to defeat Hillary Clinton in 2016 is turning its sights to Republican House members in high-tax states, including New York and New Jersey, saying it will be “counting on” them to support GOP tax legislation.

• For a full account of the day, click here.

—With assistance from Anna Edgerton, Erik Wasson and Steven T. Dennis

Bloomberg News
Tax reform Tax cuts Orrin Hatch Kevin Brady
MORE FROM ACCOUNTING TODAY