WASHINGTON – Senate Republicans partially solved their tax reform bill’s problem with budget deficits Tuesday by expanding it to include repeal the 2010 mandate for Americans to purchase health insurance.
Repeal of the healthcare mandate, which would likely increase healthcare costs for state and local governments, helps Republicans resolve one of the tests of the so-called Byrd Rule which requires legislation to not significantly add to the budget deficit after 10 years. The Byrd Rule must be met for the tax bill to be considered under the reconciliation process allowing a simple majority vote in the Senate.
The congressional budget resolution for fiscal year 2018 allows up to $1.5 trillion in new federal debt over 10 years, and the Senate tax bill follows that.
“If your specific question is, will this take care of everything after year 10, the answer is no,” said Sen. Bill Cassidy, R-La. But it does provide a partial solution, he said, adding, “It does provide some savings in the post 10-year period.”
Much of the legislation’s cost involves lowering the corporate tax rate to 20% from 35% and lowering individual tax brackets as well.
Among the already controversial pay-fors – one strongly opposed by state and local governments -- is the repeal of the federal deduction for state and local taxes.
Repeal of the individual health insurance mandate would reduce budget deficits by about $338 billion over 10 years through 2027, the nonpartisan Joint Committee on Taxation and Congressional Budget Office said in a joint analysis released last week.
“My understanding is that the individual mandate is a tax,” Sen. John Thune, R-S.D. said, explaining the decision during the Senate Finance Committee’s debate over the tax bill. “This is a tax that punishes people for doing something that they wouldn’t want to do.”
Democrats said repeal of the mandate would result in higher health premiums for millions of Americans by allowing healthy people to withdraw from the risk pool.
“This is partial repeal of the Affordable Care Act,” said Sen. Ron Wyden of Oregon, ranking Democrat on the finance committee.
Tuesday’s announcement of repeal of the healthcare mandate came during the second day of the finance committee’s debate of tax reform.
Democrats were denied their request for an additional day to submit new amendments on the repeal of the healthcare mandate. Instead, Republican said they could revise many of their existing amendments.
Sen. Tim Scott, R-S.C., said 80% of the Americans who pay the federal penalty for not having health insurance have incomes under $50,000. “If we are talking about doing things for hard working Americans, here’s a place to start cutting their taxes,” Scott said.
However, it also would reduce the number of Americans with health insurance by 4 million in 2019 and 13 million in 2027, according to the joint analysis by CBO and the JTC.
Sherrod Brown, D-Ohio, cited the benefits of having health insurance, saying that 250,000 Ohioans currently are getting treatment for opioid addiction because they have coverage.
For the health exchanges to be successful, they have to have a good mix of with young people and healthy people, said Sen. Tom Carper, D-Del.
Senate Democrats urged Republicans to slow down their process and consider the implications of their proposals.
House Republicans plan a floor vote Thursday on their tax bill – which includes termination of private activity bonds and advance refundings after this year.
The Senate Finance Committee is on track to finish its tax bill Thursday, although there will be a “walk through” of the revised bill Wednesday.
Senate Republicans could bring their tax bill to a floor vote the week after Thanksgiving.
“I don’t know what the hurry is and God help me I hope it’s not a December election,” said Sen. Maria Cantwell, D-Wash., referring to the Dec. 12 special election for a U.S. Senate seat in Alabama where Republican candidate Roy Moore is being urged to withdraw over allegations of harassment of young women.
If Republicans lose the Alabama seat, their Republican majority would be reduced to 51 seats with 47 seats held by Democrats and two held by independent senators who caucus with the Democrats.