Individual Mandate Repeal Spells Doom for Tax Reform

Individual Mandate Repeal Spells Doom for Tax Reform
AP Photo/J. Scott Applewhite

The GOP’s attempt to reform the U.S. health-care system failed abysmally. Now that they’ve moved on to tax reform, it’s clear that Republicans haven’t learned their lesson. The Senate Finance Committee recently released their initial tax bill, which is slated to go before the full Senate for a vote this week. It includes a repeal of the individual mandate — a key provision of the Affordable Care Act that requires individuals to purchase health insurance or pay a fine. Reforming the tax code was already going to be hard enough. If Republicans try to sneak in an attempt to undermine Obamacare, their tax bill could fail — and they could end up paying the price in 2018. 

Summer was only a few months ago, but Congress’s memory seems to have faded along with the warm weather. Apparently, congressional Republicans don’t remember that their initial health-care bill died in the Senate after struggling to pass the House, and that the “skinny repeal” — which included just a repeal of the individual mandate along with a few other provisions — failed in dramatic fashion. Even the Graham-Cassidy legislation, billed as a health-care compromise, eventually crashed and burned. These legislative failures have made tax reform a must-win for Republican lawmakers if they have any hope of maintaining a majority in 2018.

While House Republicans have passed their version of the tax bill, there’s no guarantee it will make it through the Senate, even ignoring the health-care complications. Senate Republicans can only afford two defections, with Vice President Mike Pence presumably breaking a tie. Yet Sens. John McCain, Bob Corker, and Jeff Flake are likely to oppose the bill, and Sen. Ron Johnson has already come out against it. Lisa Murkowski and Susan Collins — two of the Senators who voted down the Obamacare repeal — are also on the fence, though Murkowski has indicated that she may be willing to scrap the mandate, if other health-care legislation gets passed (which looks unlikely). Including a health-care provision that moderate Senators have opposed in the past won’t win their support on tax reform. So why are some Republicans set on including a repeal of the individual mandate? 

The reason is that the Congressional Budget Office (CBO) found that repealing the individual mandate would free up $338 billion in federal revenue, since fewer people signing up for insurance means the federal government pays out less in subsidies. This money could then be used to pay for additional rate cuts and tax relief. But while this might help make the math work, it could also mute the growth effects that make tax reform worth it in the first place.

The idea behind using tax cuts as a form of economic stimulus is simple. If you let everyday Americans keep more of their own money, they’ll go out and spend it — and spending is what drives economic growth. But the CBO also estimates that repealing the individual mandate would mean 10 percent increases in health-insurance costs for most years over the coming decade. This means that while Americans may have more money in their bank accounts, a significant portion of it would go toward paying higher rates for the same health-care coverage they’re already receiving. As a result, the economic impact of tax reform could be much smaller than it would otherwise be. What’s more, failing to deliver on promises of growth could cost Republicans in 2018, dealing a major blow to the small-government movement.

There are lots of reasons to support repealing the individual mandate on its merits. Despite the fact that the Supreme Court deemed the penalty for those without insurance a form of taxation, it remains unclear whether forcing people to buy a product on the private market really is a constitutional use of Congress’s power. And even if it is, the “tax”— which ranges from $695 to $13,380, and is paid by 6.5 million Americans each year — disproportionately impacts middle-class families. Of all the households who paid the tax in 2016, nearly 80 percent had incomes of $50,000 or less. So it’s no surprise that 50 percent of Americans think it should be repealed. 

But this doesn’t justify repealing the individual mandate in a tax reform bill that already looks unlikely to survive. Instead of going for the double whammy on taxes and health care, congressional Republicans should begin by trying to come up with a bill that might actually pass. Their reelection may depend on it.

Brad Polumbo is a Young Voices Advocate. His work has appeared in the Boston Globe, the Washington Examiner, and Spiked. He can be found on Twitter @Brad_Polumbo.

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