Tax Cuts Tied to Higher Insurance Premiums, Dems Say

WASHINGTON (CN) – A new version of the tax-reform bill that kills the federal health care law’s individual mandate to fund deep tax cuts prompted outcry Wednesday from Senate Democrats. 

“This bill seems to get worse by the hour,” said Sen. Ron Wyden, D-Ore., the Senate Finance Committee’s ranking member.

Wyden’s comment came at the opening of a tense and often heated executive session to debate the new bill, which Republicans say is needed to provide much needed tax relief to the middle class.

The Senate bill would double the standard deduction, deeply and permanently cut the corporate tax rate, and repeal the federal deduction for local and state income taxes and property and sales taxes.

In addition to eliminating the health care mandate, the modified version of the Senate bill doubles the child tax credit to $2,000 and includes a slight, albeit temporary, reduction of individual tax rates for three middle-income brackets. It also expands the eligibility criteria for a 17.4 percent deduction for pass-through businesses.

GOP leaders announced the inclusion of the insurance-mandate component Tuesday afternoon, after the committee spent the day debating the bill without having seen it.

Sen. Orrin Hatch, a Utah Republican who chairs the committee, confirmed at 10:30 p.m. that elimination of the mandate is included in the modified bill.

”The modified mark will effectively repeal the individual mandate tax to help provide additional relief to low- and middle-income families,” a press release from the Finance Committee states.

Although the House version of the bill does not contain a provision to repeal the health insurance mandate, President Donald Trump is reportedly planning to ask House members personally that they add it before the measure comes to the floor for a vote on Thursday.

The individual mandate under the Patient Protection and Affordable Care Act imposes a tax penalty for those who go without health insurance, helping to keep costs lower for everyone by boosting enrollment of younger, healthier individuals who spread cost across risk pools.

Without the mandate, premiums could spike as fewer people sign up for Medicaid or federally subsidized private insurance, according to analyses by health-policy experts.

The nonpartisan Congressional Budget Office has said repealing the mandate would cause 4 million Americans to lose health insurance by 2019, with 13 million losing coverage by 2027. That would free up more than $300 billion over the next decade that previously funded insurance subsidies that Republicans want to use to for tax cuts.

Meanwhile premiums would rise by 10 percent most years in the next decade, the CBO says.

The surprise move to eliminate the mandate, which could upset congressional efforts to pass tax reform, followed on the heels of a tweet from President Trump Monday that encouraged Congress to incorporate the provision into its effort to overhaul the tax system for the first time in more than 30 years.

Republicans see passage of a tax plan as a must-do so that President Trump will get his first major legislative victory since taking office.

Republicans largely support ending the mandate, saying it infringes on personal freedom by forcing Americans to buy a product they might not want, or even be able to afford.

According to information put out by the Senate Finance Committee, in 2017 the penalty for not having insurance amounted to 2.5 percent of a household’s income or $695, depending on which is greater.

“All we do in this bill, is we zero out the punishment that … under current law, we inflict on people who decide they can’t afford to comply with this mandate,” Sen. Pat Toomey, R-Pa., said.

Citing IRS statistics, Republicans say that 80 percent of households that pay the penalty make less than $50,000 per year.

Republicans also blame the mandate for rising premiums and health care costs, saying that the penalty has failed to adequately expand, and by extension, spread costs across the insurance pools.

But Democrats complained that tax relief could evade some middle-class Americans if they are forced to pay higher health insurance premiums. Wyden said that amounts to a tax hike.

“If you have to pay more than an extra $1,000 for health coverage,” Wyden said, “isn’t the impact on middle-class families’ budgets just the same as a more than $1,000 tax increase?”

During a markup of the bill on Wednesday – the third day of work on the bill this week – Democrats slammed Hatch over the committee process of drafting the bill.

Sen. Claire McCaskill, D-Mo., asked Hatch if he could provide a summary of the 100-page bill, which she received late Tuesday night, to better understand the changes it contains.

Hatch responded, referring to the Senate as a whole: “It’s the way we work around here.”

A defiant McCaskill insisted that Hatch has always run the committee in a bipartisan and cooperative manner.

“What is making you do this to us,” McCaskill asked. “I don’t get it.”

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