Scrapping Tax Cuts Could Boost Senate Health Bill

Some key Republicans are open to keeping Obamacare’s investor taxes, but it’s unclear whether the move would yield more support for the bill.

Sen. John Thune
AP Photo/J. Scott Applewhite
Casey Wooten
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Casey Wooten
June 29, 2017, 8 p.m.

A pro­pos­al to re­move a $172 bil­lion tax cut in the Sen­ate Re­pub­lic­an Obama­care-re­peal bill is pick­ing up steam, with some GOP mem­bers ap­pear­ing will­ing to give up the pro­vi­sion in or­der to ad­vance the fal­ter­ing le­gis­la­tion.

Sev­er­al Re­pub­lic­ans said Thursday that they’re open to scrap­ping a re­peal of the Af­ford­able Care Act’s 3.8 per­cent tax on in­vest­ment in­come, which largely tar­gets the wealthy, in or­der to provide more sub­sidies for low-in­come Amer­ic­ans who buy in­to the ACA’s in­sur­ance ex­changes.

Scrap­ping the tax re­peal could provide an av­en­ue to at­tract more mod­er­ates to the health care re­peal bill, such as Sens. Susan Collins of Maine and Dean Heller of Nevada. Some mod­er­ate Sen­ate Re­pub­lic­ans have op­posed the bill’s steep cuts to Medi­caid and pro­vi­sions that would throw off as many as 22 mil­lion in­di­vidu­als from in­sur­ance rolls. That may help get Re­pub­lic­ans to the 51 votes needed to pass the re­peal bill us­ing re­con­cili­ation, a par­lia­ment­ary move meant to avoid a fili­buster from Demo­crats, who are lined up en masse against the bill.

Sen. John Thune, a mem­ber of the Re­pub­lic­an lead­er­ship who sits on the Sen­ate Fin­ance Com­mit­tee, told re­port­ers Thursday that he’s open to the idea of elim­in­at­ing the tax cut if it means ad­van­cing the re­peal bill.

“If it takes something like that to get our mem­bers on board to move this pro­cess for­ward, I think we have to con­sider that,” Thune said.

Sen. Mike Rounds, who has ques­tioned the re­peal bill’s in­vest­ment-tax cut, said that while the Sen­ate bill is bet­ter than the cur­rent Obama­care sys­tem, some changes could be made to make it pal­at­able to more sen­at­ors.

“We’re just try­ing to get to 50 votes, and when you try to get to 50 votes you try to do what you can to handle the oth­er folks’ con­cerns about the changes that are there,” Rounds said.

Rounds said Re­pub­lic­ans have had “broad dis­cus­sions” on the in­vest­ment tax, and it’s one of sev­er­al op­tions be­ing ex­plored to at­tract more mem­bers to the bill. Still, Rounds said Sen­ate Ma­jor­ity Lead­er Mitch Mc­Con­nell has made no guar­an­tees about scrap­ping the tax re­peal.

The cur­rent ver­sion of the Sen­ate bill would elim­in­ate a 3.8 per­cent tax on net in­vest­ment in­come, which is in­come re­ceived from as­sets such as stocks and bonds, for in­di­vidu­als earn­ing more than $200,000 per year or $250,000 for mar­ried couples fil­ing jointly. The tax, which went in­to ef­fect in Janu­ary 2013, also cov­ers es­tates and trusts and is ap­plied on top of cap­it­al-gains taxes.

The Con­gres­sion­al Budget Of­fice’s score of the health care bill said elim­in­at­ing the tax would cost the fed­er­al gov­ern­ment $172 bil­lion over 10 years.

Con­ser­vat­ives have pushed hard to elim­in­ate the taxes cre­ated as part of Obama­care, and Sen­ate Fin­ance Com­mit­tee Chair­man Or­rin Hatch has been vo­cal on that is­sue. But when asked wheth­er he thought Re­pub­lic­ans would scrap the tax cut, Hatch told re­port­ers, “We’ll see what hap­pens.”

Mc­Con­nell was forced to delay a pro­ced­ur­al vote on the health care bill Tues­day after sev­er­al GOP sen­at­ors said they would not vote for the meas­ure in its cur­rent form. The move comes as pub­lic sup­port for the bill re­mains low. An NPR/PBS News­hour/Mar­ist poll re­leased June 28 showed sup­port for the bill at only 17 per­cent, with 55 per­cent dis­ap­prov­ing.

Sen­ate Demo­crats have hammered their GOP col­leagues over the bill’s pro­vi­sions cut­ting in­sur­ance rolls, but also over what they say are tax breaks for Amer­ica’s wealth­i­est cit­izens.

“We’re talk­ing about av­er­age Amer­ic­an work­ing people, they’re talk­ing about mult­i­bil­lion­aires,” Sen­ate Minor­ity Lead­er Chuck Schu­mer said at a June 27 press con­fer­ence. “That’s why they’re in such trouble, be­cause their bill is aimed at help­ing the very wealthy, where­as we are try­ing to help Amer­ic­an fam­il­ies.”

If passed in the Sen­ate, the bill must still go to the House, which passed its own ver­sion in May with more cuts to Obama­care pro­grams. Key House Re­pub­lic­ans were split on the in­vest­ment-tax is­sue.

House Speak­er Paul Ry­an de­clined to weigh in on the Sen­ate deal-mak­ing dur­ing a Thursday press con­fer­ence.

Al­though House con­ser­vat­ives have made re­peal­ing Obama­care’s taxes a center­piece of their policy de­mands, House Free­dom Caucus Chair­man Mark Mead­ows in­dic­ated Thursday that he could ap­prove of the Sen­ate bill even if it did not in­clude a re­peal of those taxes, be­cause some of those is­sues could be ad­dressed later this year.

“Our po­s­i­tion has al­ways been that we need to make sure that we re­peal all the taxes,” Mead­ows said. “That’s our of­fi­cial po­s­i­tion. However, to look at this my­op­ic­ally and in a va­cu­um would not be ac­cur­ate. We’ve got tax re­form com­ing on the back side of this, so all it’s do­ing is chan­ging the baseline that you could po­ten­tially change in 10 months or 10 weeks if you’ve got the polit­ic­al will to do so.”

Com­plic­at­ing mat­ters is the fact that us­ing the health bill to re­peal the Obama­care taxes will make it easi­er for Re­pub­lic­ans to craft tax re­form later on, by chan­ging the baseline amount of fed­er­al rev­en­ue that would be used to cal­cu­late a re­form pack­age’s ef­fects on the de­fi­cit. Keep­ing the Obama­care taxes in place now could mean a smal­ler tax-re­form ef­fort later this year.

House Ways and Means Chair­man Kev­in Brady, whose com­mit­tee is re­spons­ible for writ­ing tax-re­form le­gis­la­tion, said Thursday he hopes all the Obama­care tax cuts re­main in the bill if it heads to his cham­ber.

“I’m look­ing for­ward to the Sen­ate re­mov­ing all of those taxes from our eco­nomy,” Brady said.

Daniel Newhauser and Erin Durkin contributed to this article.
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