Top Senate tax writer Orrin Hatch.
Senate Republicans have decided to pay for their corporate tax cuts by drastically reducing the number of Americans with health-insurance coverage. On Tuesday afternoon, Mitch McConnell’s caucus announced that they would include a provision repealing the Affordable Care Act’s individual mandate (the law’s penalty for going without health insurance) in their tax “reform” bill.
The idea is not a new one — but the Senate GOP’s interest in it is. Until Tuesday, Senate Republicans had argued that adding elements of Obamacare repeal to tax legislation was too risky. After all, the upper chamber had repeatedly failed to kill Barack Obama’s signature achievement. Passing giant, unpopular corporate tax cuts — financed by tax increases on some upper-middle-class families and $1.5 trillion in deficit spending — was hard enough. Doing so while also increasing the ranks of the uninsured by 13 million appeared downright quixotic.
But now, McConnell & Co. seem to have concluded that their bill’s math problems are bigger than its political ones: Right now, the Senate GOP tax bill would likely add more than $200 billion to the deficit, annually, in the second decade after it’s passed. But due to arcane Senate rules, Republicans can’t pass their tax plan out of the upper chamber — without Democratic cooperation (which they won’t get) — unless their bill adds zero dollars to the deficit, annually, in the second decade after it’s passed.
There is no easy way to erase $200 billion in annual deficits. But repealing the individual mandate gets Republicans a little closer to doing so. According to the Congressional Budget Office, repealing the mandate would reduce the number of Americans with health insurance in 2027 by 13 million. This means that millions fewer Americans would qualify for Obamacare subsidies — and, thus, that the government would save about $338 billion over the next decade. It would also mean that premiums on the individual market would rise by 10 percent (since fewer healthy people would purchase insurance).
Republican senators John Thune and Rand Paul are suggesting that those savings will be “distributed in the form of middle-income tax relief.” But this is almost certainly a lie: Republicans can’t afford to add new tax cuts to their bill at this point, and that $338 billion will almost certainly be spent on reducing the long-term fiscal impact of slashing the corporate tax rate by 15 percentage points.
The GOP senators who voted down Obamacare repeal earlier this year — Susan Collins, Lisa Murkowski, and John McCain — did not immediately withdraw their support of Senate tax bill Tuesday. But they didn’t seem happy about the revival of “skinny repeal” either. As Bloomberg’s Steve Dennis reports:
Here, Collins references the bipartisan Murray-Alexander health-care bill, which would shore up the Obamacare marketplaces while giving red states a bit more latitude in complying with the Affordable Care Act’s regulatory requirements.
Senator Thune suggested Tuesday that Republicans would pass Murray-Alexander right after their tax bill — and, thereby, compensate for the negative effects of repealing the individual mandate.
This would be a clever maneuver for Republicans. Passing Murray-Alexander would likely reduce the coverage losses from repealing the individual mandate — which means that it would also reduce the savings from that move. But, so long as Senate Republicans pass their tax bill first, they can count the full $338 billion in savings against the cost of their tax cuts.
But the GOP would need Democratic cooperation to pass the compromise health-care legislation. And Senate Minority Leader Chuck Schumer said Tuesday that if Republicans repeal the individual mandate, then his caucus will not offer any such help.
From one angle, Tuesday’s developments might look like a triumph for conservatives: They now have a bill that delivers massive tax cuts — and kills the least popular part of Obamacare — at the same time.
But then, there’s a reason Senate Republicans wanted to avoid adding a dash of Obamacare repeal to their tax bill. Moments after the bill’s newest amendment was announced, America’s top insurers, hospital groups, and physicians’ associations released a joint letter declaring their opposition to the legislation.
And the revival of the Obamacare fight could make it easier for Democrats to mobilize grassroots opposition to the bill — the stakes of tax cuts are much less visceral than those of health care. Plus, if Schumer really won’t play ball on Murray-Alexander, then Republicans will be on the hook for yet another spike in premiums on the individual market next year. That may have little impact on the average Senate Republican’s appetite for giant tax cuts, but it could make it harder for McConnell to secure the votes of Collins, Murkowski, and McCain.
Finally, as Josh Barro notes, repealing the individual mandate now would make a future attempt to repeal Obamacare all but impossible: Every Republican Obamacare replacement plan was funded, in part, by the savings generated by repealing the individual mandate.
Senate Republicans didn’t tie their tax bill’s fate to partial Obamacare repeal Tuesday out of bold confidence. They did it out of desperation. The party needs a lot of new revenue. Repealing the individual mandate exacerbates the political challenges of passing tax cuts — but so would any other measure that cuts the GOP bill’s price tag by $338 billion.