Corker Says GOP to Scrap Health Bill's Investment Tax Repeal

  • Collins, Rounds suggest keeping tax aimed at high earners
  • McConnell negotiating with Republicans to win over holdouts

McConnell Scrambles to Win GOP Votes for Health Bill

Republican Senator Bob Corker said Thursday that he expects GOP leaders to scrap a provision in their health bill that would repeal a tax on investment income that affects high-income earners.

The Tennessee Republican said the decision to retain Obamacare’s 3.8 percent tax on net investment income would help Republicans boost subsidies for low-income people in the individual exchanges. Some other Republicans said they were willing to at least consider the idea.

"We are going to figure out a way, I believe, before Friday comes to greatly enhance the ability of lower income citizens to buy insurance on the exchange and at the same time my sense is that the 3.8 percent is going to go away," Corker told reporters. "It’s not an acceptable proposition to have a bill that increases the burden on lower-income citizens and lessons the burden on wealthy citizens."

Corker’s remarks came after several Senate Republicans began to question Wednesday whether the bill should be repealing so many taxes on wealthy Americans when the legislation would scale back subsidies for the poor.

Susan Collins of Maine and Mike Rounds of South Dakota both criticized the draft bill released by Majority Leader Mitch McConnell for repealing the investment surtax. 

Susan Collins

Photographer: Andrew Harrer/Bloomberg

“I do not see a justification for doing away with the 3.8 percent tax on investment income, because that is not something that increases the cost of health care,” Collins said. “So I distinguish between those tax increases that were part of Obamacare that increase premiums and the cost of health care versus those that do not.”

Second-ranking Senate Republican John Cornyn of Texas said the idea of keeping the tax was "being discussed," and that it’s possible the repeal could be addressed later in a tax-code overhaul. Third-ranking Senate Republican John Thune of South Dakota said, "I don’t think there’s a final decision been made on that."

Senator Pat Toomey of Pennsylvania said he’d be "shocked if that tax increase is not repealed."

"We pledged that we’d repeal Obamacare. I don’t remember anybody going around saying, oh, except for these job-killing tax increases," Toomey said.

Scaling back the tax cuts could provide a path to winning over key moderate senators who have recoiled at the soaring premiums and deductibles for millions of low-income people as scored by the CBO, and the estimated 22 million fewer people who would have insurance in a decade. Meanwhile, conservatives have pushed to wipe out all of the taxes, though senators like Ted Cruz have not insisted every tax cut remain as part of an overall deal. Conservatives have been focused more on cutting regulations to lower premiums.

Representative Mark Meadows of North Carolina, chairman of the small-government Freedom Caucus, said he is willing to consider keeping the investment tax "if Senator Corker thinks that that’s important to make sure we get the policy right." He added, "I’m willing to at least look at it."

Mike Rounds

Photographer: Zach Gibson/Bloomberg

Up to now, senators had largely been focused on the bill’s health-care effects. But its tax cuts, many of which would benefit the wealthy, are politically sensitive, particularly given statements by President Donald Trump that the GOP health bill shouldn’t be “mean.”

Tax Credits

GOP leaders were forced to delay a planned vote on the health bill this week after five Republicans said they would vote against a key procedural motion. Several more Republicans came out against the measure after the delay. 

McConnell is trying to negotiate a compromise version by Friday and Corker said Thursday that it’s possible that deadline will be met. 

"It feels like there’s momentum right now," he said.

The draft legislation would eliminate a 3.8 percent tax on net investment income such as capital gains and dividends for people who earn more than $200,000 and couples with incomes over $250,000 -- retroactively, effective Dec. 31, 2016. Ending the tax would cost the federal government about $172 billion over a decade, the Congressional Budget Office estimated.

Rounds called for using the savings to expand tax credits for Americans who are currently ineligible for assistance because their spouses have employer plans that don’t cover them. The South Dakota Republican said GOP leaders have told him the proposal would receive a CBO analysis.

"If we could make a change in that, I really think we could help millions of people," Rounds told reporters after a Republican lunch discussion. "These are folks who get nothing."

Schumer Response

McConnell has said eliminating the new taxes created under the Obamacare law would put downward pressure on rising health insurance premiums. A McConnell spokesman didn’t immediately respond to a message asking if he’s open to keeping the net investment tax hike.

Collins, whose opposition contributed to forcing McConnell to cancel a planned vote this week, said she doesn’t think the tax cuts for the wealthy should be in the bill. She argued that some of Obamacare’s taxes increase the cost of health care and are worth repealing, citing the 2.3 percent sales tax on medical devices.

Democrats have pilloried the Republican legislation as a redistribution of wealth from the poor to the rich, noting nonpartisan estimates that it would cut Medicaid, a health insurance program for low-income Americans, by $772 billion over a decade, and that 45 percent of its $700 billion tax break would go to the top 1 percent of earners.

Senate Minority Leader Chuck Schumer said Wednesday that the GOP bill would "cut support for Americans in nursing homes, those suffering from opioid addiction, and those with a pre-existing condition to pay for a tax break for the wealthiest few."

The critiques of the tax breaks come as new surveys released Wednesday found that the Senate Republican health-care bill is unpopular -- a Quinnipiac poll showed that just 16 percent of Americans support it, while a USA Today/Suffolk poll found the number even lower at 12 percent.

‘Larger Burden’

Corker, who faces re-election in 2018, voiced hesitation with tax cuts for the highest earners. Apart from the net investment income tax, the Republican bill repeals a 0.9 percent Medicare surtax on incomes above the same thresholds after 2022.

One prominent conservative, Mike Lee of Utah, has also expressed discomfort about the structure of the Senate bill.

He said in a statement Tuesday that the legislation "included hundreds of billions of dollars in tax cuts for the affluent, bailouts for insurance companies, and subsidies for lower-income Americans. But it ignored the middle-class families who have borne the brunt of Obamacare."

— With assistance by Terrence Dopp

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