GOP tax bill taking same path to collapse as health-reform efforts. Or is it?

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The News:

House Republicans last Thursday (November 16, 2017) passed legislation that would overhaul the U.S. tax code, a crucial step forward in their effort to enact the centerpiece of President Trump’s economic agenda.

The bill passed with 227 votes in favor and 205 against, a comfortable margin in the divided chamber, according to the Washington Post. Thirteen Republicans voted against the bill, while no Democrats voted for it.

Trump and Republican leaders in Congress are aiming to pass legislation by year’s end that would simplify the code and deliver $1.5 trillion in tax cuts over a decade. Both the House and Senate bills deliver the majority of the cuts to corporations and wealthy Americans, but there are significant differences between the bills that would have to be resolved.

Passing the bill is a major victory for House leaders, including Speaker Paul Ryan, who have long asserted that cutting taxes on the wealthy and businesses will spur economic growth that benefits all Americans.

The GOP’s tax plan faces an uncertain future in the Senate, where Republican leaders, working with a slimmer majority than in the House, are struggling to find enough support for their bill.

Multiple Republicans have expressed reservations about the Senate plan, which would permanently reduce the corporate tax rate but allow cuts for households and individuals to expire.

The plan would also repeal the Affordable Care Act’s individual mandate to purchase health insurance, a difference from the House plan that gives Senate leaders more revenue to work with but would undermine a system aimed at providing health coverage to millions of Americans.

Congress’s nonpartisan tax analysts dealt the Senate an additional setback Thursday when they concluded the bill would, by the end of a decade, raise the average tax burden for households making less than $75,000 a year.

Much of the hit to poor and working-class Americans would stem from the changes to the healthcare law, as many would no longer get subsidies to help them afford health insurance because they would give up on buying it altogether, according to the Joint Committee on Taxation.

Both the Senate’s expiring tax cuts for individuals and the elimination of the Affordable Care Act’s mandate were included to reduce the bill’s contributions to the national debt. Republicans say they expect the tax cuts for individuals to be extended in future legislation, but the gap between the measure’s treatment of corporations and individuals has given moderates pause in both chambers.

Republicans hope to pass the measure with 50 votes, rather than the 60 votes typically needed to get bills through the Senate, by using a Senate procedure known as “reconciliation.” The problem is Republicans control only 52 of the chamber’s 100 seats, and Democrats’ opposition appears unanimous, meaning the bill would probably go down to defeat if only three GOP senators vote against it. That’s exactly what happened with the healthcare bill.

Steve’s Take:

After watching the GOP’s 7-years long attempt to repeal Obamacare collapse earlier this fall, I’m stunned to witness what resembles their almost uncanny replay of the exact same failed strategy for their much ballyhooed tax-reform plan.

The House in both cases voted their plan through, but then several GOP senators couldn’t support their bill because of the theft of health coverage for many millions of Americans. And yet with their attempt to repeal the individual mandate, they are almost insuring they will get the same thumbs-down vote from the same GOP senators who couldn’t support the health bill.

Unless I’m missing something, which I definitely could, I don’t get it.

I agree with a prescient piece in the New York Times by Haeyoun Park arguing that if the individual mandate is repealed, people with lower health costs would be less likely to buy insurance on the health law’s marketplaces. In fact, the Congressional Budget Office (CBO) expects that 13 million more people would be uninsured in 10 years.

Park explains: The mandate exists to help ensure that there are enough healthy people in the insurance pool to balance out the sick, who are costlier to insure. The health law forces most people who go without insurance to pay a tax penalty.

Without the mandate, people who buy insurance to avoid the penalty and who do not expect to use much medical care would be more likely to drop coverage. The insurance pool would be left with more people with higher costs, which would cause the average price of coverage to rise.

As insurance got more expensive, more people would most likely exit the pool. Some healthy people could find insurance difficult to afford, and others with health problems could decide that coverage was no longer valuable relative to their needs.

Almost all the people exiting the pool would be those who are ineligible for premium subsidies from the federal government. That’s because people who qualify for the subsidies would largely be shielded from premium increases.

“The premium subsidies, which increase dollar for dollar as rates go up, cushion the impact and prevent a full-on death spiral,” said Larry Levitt, a policy expert at the Kaiser Family Foundation.

The cycle could continue, which would cause premiums to rise even more. The CBO expects premiums to rise by 10% for most years over the next decade if the mandate is eliminated.

While not popular, the individual mandate is a crucial part of the Affordable Care Act. Without the incentive, it would be hard for insurers to cover people with pre-existing conditions, one of the law’s most popular features.

Has Mitch McConnell lost it completely?

Steve's Take: #GOP must be smarter than to let #taxreform sink like their #Obamacarerepeal effort. Click To Tweet

The stinging blow of the health-reform failure had to leave a mark and teach him something. Is the Senate leader just plain daft? Or daft like a fox.

Senate Republicans are saying publicly they are counting on repeal of the individual mandate to free up hundreds of billions of dollars to pay for an array of tax cuts to corporations and individuals. They are assuming that without a mandate, many people would no longer buy insurance, so the government would spend billions of dollars less on the subsidies the health law provides to help those under a certain income level pay their premiums.

And yet, the nonpartisan CBO has estimated that doing away with the mandate would result in nearly 13 million more people without insurance and federal savings of $338 billion by 2027. Wasn’t that same general assessment that put the dagger in the Obamacare repeal effort?

Bottom Line:

Think about it. Repealing the mandate was not a part of the tax legislation that passed in the House last week. But Senate leaders added it to their bill, both presumably as a step toward making good on their promise to dismantle Obamacare and as a way to generate a big tub of revenue.

On Sunday, Mick Mulvaney, President Trump’s budget director, said on CNN’s “State of the Union” that the administration supports repealing the mandate, the New York Times points out. Most people who owe the penalty earn less than $100,000 a year, he said, arguing that “there’s actually a benefit to folks” if the mandate goes away.

But Mulvaney added, “If it becomes an impediment to getting the best tax bill we can, then we’re O.K. with taking it out.”

Did you hear that? Trump’s own budget director says no problem dropping the provision to scrap the individual mandate.

I think the GOP must be smarter than to let their crucial tax-reform bill sink in much the same manner as their Obamacare repeal effort. I agree with a piece in the NYT today that by including the individual mandate repeal provision in the senate plan then taking it out at the last minute, they might just avoid the same calamity and get at least a tie vote. Vice President then Mike Pence would break the tie, thereby finally getting a major piece of GOP legislation passed in their leader’s first term.

That’s all I can reason about this healthcare provision being inserted into a tax bill. Perhaps McConnell will even get a modicum of credit from the White House for the strategy, if it works. If it doesn’t, he will surely get the blame.