The Senate Tax Bill’s Chances Just Got Better

Updated on
  • Murkowski agrees to kill Obamacare’s individual mandate
  • Hurdles remain, including concerns about deficit effects
Bloomberg’s Anna Edgerton reports on Sen. Murkowski’s pivot on the Obamacare individual mandate repeal effort.

Alaska Senator Lisa Murkowski’s decision to agree to smash Obamacare’s individual mandate may remove one obstacle to passing the Senate Republican tax bill next week.

“I believe that the federal government should not force anyone to buy something they do not wish to buy in order to avoid being taxed,” she wrote in an op-ed in Alaska’s Daily News-Miner newspaper posted online Tuesday.

Murkowski didn’t mention the tax bill in the article. But she previously said she preferred not to mix it with health care, and she was one of three mavericks who killed the GOP’s Obamacare repeal efforts earlier this year.

Her announcement came after she said last week that Congress should act to stabilize health-insurance markets in conjunction with eliminating the individual mandate -- a requirement that individuals get health insurance or pay a federal penalty -- in the tax legislation. In the op-ed, Murkowski reiterated her support for proposed legislation to do just that but didn’t indicate it was a precondition for her to support the tax bill.

The mandate repeal now appears much more likely to stay in the tax bill, where it helps offset more than $300 billion in other tax cuts -- revenue needed to bring the bill into compliance with Senate budget rules. It’s also crucial to President Donald Trump’s goal of making corporate tax cuts permanent under those rules.

There are still other hurdles for the tax bill to get to 50 votes. Republican Senators John McCain of Arizona and Susan Collins of Maine -- who joined Murkowski in torpedoing efforts to repeal the Affordable Care Act earlier this year -- have yet to sign on. And Wisconsin Senator Ron Johnson also threatened to vote against the bill without more tax relief for partnerships, limited liability companies and other so-called pass-through businesses. Senate leaders have said they’re trying to address Johnson’s concerns.

Deficit Questions

Three Republican senators, Bob Corker of Tennessee, Jeff Flake of Arizona and James Lankford of Oklahoma, have raised specific concerns about the bill’s effect on the deficit. On Wednesday, a new independent analysis of the bill found that it would continue to reduce federal revenue each year after 2027 -- a potential complication for Senate tax writers.

Murkowski’s vote has long been wooed by the Senate Majority Leader Mitch McConnell. The bill notably includes a provision opening up Alaska’s Arctic National Wildlife Refuge to oil drilling -- a priority for Alaska lawmakers for decades.

In recent weeks, Murkowski has been openly conflicted on how to vote on the mandate, saying she was concerned that higher premiums from repealing it could cancel out the tax cuts for some in the middle class. But in her op-ed, she drops those concerns, saying repealing the mandate would simply restore people’s freedom to choose and noting the sky-high insurance costs under the ACA in her state.

“A silver plan for a family of four, with a $9,000 deductible, will cost about $2,160 per month in 2018,” she wrote. For families who make too much for subsidies, that amounts to nearly $35,000 out of pocket before insurance kicks in, she added.

Insurance-Market Effect

She said in the op-ed that she still wants Congress to pass bipartisan legislation that aims to fix Obamacare “as fast as possible to stabilize our markets.”

Legislative staff members for Senator Patty Murray, a Washington Democrat who joined Tennessee Republican Lamar Alexander to sponsor a stabilization bill, said in a memo Tuesday that the legislation wouldn’t be enough to protect the system if the individual mandate is repealed.

“Republicans are seriously mistaken if they think passing Alexander-Murray will lessen the blow of repealing the coverage requirement included in the Affordable Care Act,” the memo said.

The Congressional Budget Office has estimated that the $300 billion in savings from repealing the mandate would come from about 13 million Americans dropping their coverage by 2027 -- eliminating the need for federal subsidies that help them afford it. Because many of them would be younger, healthier people, insurance premiums would rise 10 percent in most years, the nonpartisan fiscal scorekeeper found.

On Tuesday, a national actuaries’ group said in a letter to Senate leaders that repealing the individual mandate would raise costs for consumers and harm insurance markets.

Fiscal Study

Apart from health-care concerns, senators will have to grapple with the bill’s long-term effects on federal deficits. A new study released Wednesday may spell potential trouble on that score.

A report from the Penn Wharton Budget Model at the University of Pennsylvania found that the bill would reduce federal revenue in each year between 2027 and 2033. That finding would mean the bill doesn’t comply with a key budget rule that Senate Republican leaders want to use to pass the legislation with a simple majority over Democrats’ objections.

The rule holds that any bills approved via the fast-track process that GOP leaders intend cannot add to the deficit outside a 10-year budget window.

The official scorekeeper, Congress’s Joint Committee on Taxation, has already found that the bill would generate a surplus in its 10th year due to expiring tax breaks for businesses and individuals. But JCT hasn’t publicly weighed in on the revenue effects in subsequent years.

Senate GOP leaders have expressed confidence that their proposal will satisfy what’s known as the Byrd rule. They plan a floor vote as early as Nov. 30.

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