The Republican Senate is now moving to include repeal of the Obamacare individual mandate in their tax reform bill. That move is largely designed to quell conservative complaints about the Senate bill, which is weaker than the House version of the same bill: it delays corporate tax cuts, and retains the estate tax; pass-through businesses would see a reduced tax rate, but a smaller reduction than in the House bill; the Senate version would also sunset individual tax cuts out by 2025, and reduce inflation measures, pushing more Americans into higher tax brackets. The House bill itself is relatively weak — it proposed a $300 billion cut in taxes over the next decade on the individual side, compared to $1.2 trillion for businesses over the same period. The Washington Examiner explains:
The updated bill appears to accord with the Senate rules. It is a $1.4 trillion tax cut over 10 years that turns into a tax hike over time, raising $30 billion in the 10th year, according to Congress' Joint Committee on Taxation.
The improved score is partly a reflection of the fact that many individual tax breaks expire. Also, Republicans had announced earlier Tuesday the the amended bill would repeal Obamacare's individual mandate penalties, a change that freed up $318 billion over the decade.
That repeal would raise revenues and reduce spending, allowing those funds to be dedicated to lowering the planned 22.5 percent bracket to 22 percent; the 25 percent bracket to 24 percent; and the 32.5 percent to 32 percent.
The destruction of the individual mandate saves money by alleviating the burden on government to subsidize individuals. The Congressional Budget Office suggests that 13 million more Americans would lack health insurance by 2027 under the new plan, but the vast majority of those people are individuals who would opt out of the markets voluntarily.
This does mean a spike in overall health insurance rates for those who are already sick; those who opt out are traditionally healthier than those who don’t. This would exacerbate the so-called death spiral, by which repeal of the individual mandate creates higher prices and leads more insurers to drop out of Obamacare markets altogether thanks to the drop in subsidies. Republicans will certainly be blamed for those rising prices, particularly since Congress has failed to remove regulations on health insurance companies; Congress could be forced into increasing federal subsidies or bailouts to insurance companies to compensate, or alternatively, Congress could move to relieve regulations.
Hilariously, Democrats are complaining that the individual mandate shouldn’t be included in the bill. This prompted Sen. John Thune (R-SD) to respond, “My understanding is the individual mandate is a tax.”
All of this, of course, brings us to the next big question, if tax reform passes: will Republicans cave to the Left, or will they move to finally dump federal Obamacare regulations?