Sen. Ted Cruz (R-TX) broke against the House GOP’s tax bill Tuesday, criticizing the proposal for raising taxes on some Americans. But his idea to fix the bill could throw a major wrench into the tax reform debate.
Cruz said at a press conference Tuesday that the current House bill would disadvantage people who live in blue states, such as New York and California. The House’s tax bill, which is being marked up in committee, repeals the state and local income tax deduction, which lowers federal income taxes for many people in high-tax states.
The Joint Committee on Taxation, which analyzed the bill, found about a quarter of households would face a tax increase in 2025 under the House bill.
“There are some taxpayers who are losing exemptions, particularly in some high-tax states like New York or California that could conceivably be paying higher taxes,” Cruz said. “I think that is a mistake. I think tax reform needs to cut taxes for everybody.”
While it’s a politically popular position to take, Cruz’s solution to lower rates for everyone is unlikely to have the same appeal: He wants to repeal Obamacare’s individual mandate in the tax bill.
Senate rules limit how much the tax bill can increase the deficit, and so Republicans have been struggling to find ways to offset massive tax cuts for corporations and individuals.
Repealing the individual mandate, the Obamacare provision that penalizes people who go without health insurance, is estimated to bring in an additional $416 billion in revenue for the federal government — which, Cruz argues, Republicans could then use to protect tax deductions or lower rates even further.
Cruz, who has partnered with Sens. Rand Paul (R-KY) and Tom Cotton (R-AR) in this drive, claims this proposal should be an easy sell for his Republican colleagues. President Donald Trump also supports it.
“One of the real virtues of repealing the individual mandate, number one, [is] every Republican in the Senate has voted to repeal the individual mandate, 100 percent of us,” Cruz said.
But reality paints a very different picture. Republicans just spent the past eight months unsuccessfully trying to repeal Obamacare. As they rush to get a massive tax reform bill passed by the end of the year — for fear of going into 2018 without any major legislative wins — Cruz’s proposal is unlikely to create party unity to get it done. That’s a risk Republican leaders don’t seem likely to want to take.
Repealing the individual mandate is a political mess for Republicans
It’s true that repealing the individual mandate would cut spending. As Vox’s Dylan Scott explained, fewer Americans would be enrolled in Medicaid and on the ACA’s insurance marketplaces, where they receive federal assistance.
But there is a political price: The Congressional Budget Office also estimated that 15 million fewer Americans would have health insurance over the next 10 years if the individual mandate were repealed. During their attempts to repeal Obamacare, Republicans spent months agonizing over numbers like these, failing to find a proposal that wouldn’t increase the uninsured rate. Their attempts at repealing the individual mandate over the summer all failed.
The prospects for doing it in tax reform aren’t great, either. Republicans are operating on an extremely slim margin on error and can only afford to lose two votes. Sen. Lisa Murkowski (R-AK), who voted against the Obamacare repeal bills, has already said she does not think health care and tax reform should be tied together in one bill.
And Murkowski is not alone.
Having just spent months on health care negotiations only to come up short, Republican leadership seems reluctant to fold individual mandate repeal into their tax bill, despite the president’s vocal support. Ways and Means Chair Rep. Kevin Brady (R-TX) notably did not include a repeal of the individual mandate in the House GOP tax reform bill — or in his amendment to the bill in markup this week.
The Senate, which plans to release its version of the tax bill this week, also seems to unlikely to include the proposal.
“I would prefer to stay out of the health care process because it’s tough enough to do a tax bill,” Sen. Orrin Hatch (R-UT), who chairs the Senate’s tax-writing Finance Committee, told Politico.
Tax reform isn’t going to be easy in the Senate. Trying to tie it to health care, yet another divisive issue in the party certainly won’t help Republicans get a legislative win by the end of the year.