Senate Republicans on Tuesday revised their tax cut bill to include a repeal of Obamacare’s individual mandate — a bold move that frees up more money for deeper tax cuts and takes a whack at the health care law they have repeatedly tried but failed to repeal.
President Trump had been pushing the idea for weeks, eyeing the more than $300 billion in savings over the next decade that could be pumped into more tax cuts for average Americans.
Republican leaders on Capitol Hill had resisted, but with little hope of getting Democrats on board and looking to rally their own troops to pass the bill, the Senate’s top brass relented.
“We’re optimistic that inserting the individual mandate repeal would be helpful,” said Senate Majority Leader Mitch McConnell, Kentucky Republican.
Democrats blasted the move, saying it adds insult to an already injurious tax cut package that delivers most of its bang to businesses.
Insurers also objected, saying ending the Obamacare mandate will chase younger, healthy people out of the markets, leaving them with only older, sicker customers and thus ruin the economics of the 2010 health care law.
“Republicans just can’t help themselves. They’re so determined to provide tax giveaways to the rich that they’re willing to raise premiums on millions of middle-class Americans and kick 13 million people off their health care,” said Senate Minority Leader Charles E. Schumer, New York Democrat.
He predicted that the bill would sour more Americans on the Republicans’ plans.
But Republican leaders are counting on the move to win over wavering senators, saying the savings from nixing the mandate can be pumped back into even bigger tax cuts for the middle class.
Before the mandate, the Senate plan amounts to a $1.5 trillion tax cut over 10 years, with about 60 percent going to businesses and the rest going to individual taxpayers. The plan slashes the corporate tax rate from 35 percent to 20 percent and lowers the top individual rate from 39.6 percent to 38.5 percent while adjusting other individual tax brackets so they kick in at higher income thresholds.
Senate Finance Committee Chairman Orrin G. Hatch said including the mandate repeal allows Republicans to be even more ambitious with their plan.
“By scrapping this unpopular tax from an unworkable law, we not only ease the financial burdens already associated with the mandate, but also generate additional revenue to provide more tax relief to … individuals,” Mr. Hatch said.
The 20 percent corporate rate would be permanent but the new individual income tax rates would expire after 2025 under the modified outline Mr. Hatch released Tuesday evening.
The new plan costs about $1.415 trillion – down from the $1.496 trillion plan rolled out last week.
Mr. Hatch also announced other revisions Tuesday, including a doubling of the child tax credit from the current $1,000 to $2,000 — up from $1,650 in the first plan — and some other tweaks to individual tax rates.
Another revision makes changes so more “pass-through” companies that file their taxes as individuals can claim a new 17.4 percent deduction Republicans say is designed to give a boost to small businesses.
“The pass-through provisions in the chairman’s mark have been further streamlined to ensure these critical job creators have access to the resources they need to further expand, help hire new workers, and increase employee take-home pay,” Mr. Hatch said.
The plan also eliminates a number of deductions, such as the one for state and local taxes paid, and uses the savings to pay for lowering the rates.
With the plan bumping up against the $1.5 trillion cap set in the 2018 budget for tax cuts, lawmakers were left searching for new ways to free up money to do even more for the middle class.
Enter the individual mandate plan, which the Congressional Budget Office said would save the government more than $300 billion over the next 10 years by freeing people from the obligation to have health care coverage — and the government from the responsibility of subsidizing much of that coverage.
Some 13 million fewer people would have coverage in 2027 without the pressure from the mandate.
Some Republicans had long pushed for the move, saying it was the natural solution to their failure this year to repeal Obamacare.
Sen. Patrick J. Toomey, Pennsylvania Republican and a member of the tax-writing finance committee, said the mandate is based on a “flawed premise” that the federal government should force Americans to buy a product they might not want.
“Including the repeal of the tax penalty in our pro-growth tax reform bill gives direct relief to hardworking Pennsylvanians and assists in making permanent desperately needed changes to our outdated tax code so American businesses can be globally competitive once again,” said Mr. Toomey.
Democrats, though, framed the move as cutting a government benefit for average Americans in order to give corporations a tax reduction.
“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,” said Sen. Ron Wyden of Oregon, the ranking Democrat on the Senate Finance Committee.
Republicans hope to move their broader bill through committee this week, with possible floor action the week after Thanksgiving, as they look to get a final package to Mr. Trump’s desk by the end of the year.
The admittedly ambitious time frame comes as some Republicans view the tax overhaul effort as the party’s last real chance to give voters a reason to turn out in next year’s midterm elections, after their monthslong effort to repeal Obamacare in its entirety stalled out over the summer.
The House tax bill that advanced out of the Ways and Means Committee last week did not include a repeal of the mandate, though some Republicans said they would like it to be part of the discussion as leaders prepare for a floor vote in the House this week.
House Speaker Paul D. Ryan, Wisconsin Republican, said Tuesday that the House is pushing the bill “as we have it,” though he described things as a work in progress.
He said differences between the House and Senate versions can ultimately get hammered out in a bicameral conference committee once each chamber passes its respective plan.
“So we are just getting this process going. We think it’s very, very important we produce this. And we feel good where we are,” Mr. Ryan said.
The House plan also lowers the corporate tax rate to 20 percent immediately, while the Senate version delays it for one year.
The House also includes a full repeal of the estate tax on inheritances, while the Senate doubles the exemption rate but leaves the tax in place, and partially restores part of the state and local deduction for property taxes.