US Senate Republicans tie tax plan to repeal of key Obamacare mandate

Members of the Senate Finance Committee participate in a markup of the Republican tax reform proposal in Washington, DC.
Members of the Senate Finance Committee participate in a markup of the Republican tax reform proposal in Washington, DC. PHOTO: AFP

WASHINGTON (REUTERS) - US Senate Republicans on Tuesday (Nov 14) linked repealing a key component of Obamacare to their ambitious tax-cut plan, raising new political risks and uncertainties for the tax measure that financial markets have been monitoring closely for months.

In comments that infuriated Democrats and left some senior Republicans unsure what comes next, Senate Republican leader Mitch McConnell told reporters: "We're optimistic that inserting the individual mandate repeal would be helpful and that's obviously the view of the Senate Finance Committee Republicans as well."

The finance panel, which had been in session for two days, abruptly adjourned on Tuesday as Democrats slammed the Republicans' handling of their tax proposals, for which formal legislative language has still not been unveiled.

The committee's top Democrat, Ron Wyden, demanded more time for Democrats to discuss the issue "because we were never told that healthcare was going to be part of it and this just flew in literally out of nowhere in the last 20 minutes."

Tying Obamacare to the tax program introduces new risks for the Republicans and for President Donald Trump. Together, they have yet to score a major legislative win since Trump took power in January, even with control of Congress and the White House.

The president, who has struggled in his relations with Congress, suggested in a tweet on Monday that the mandate repeal should be added to the tax plan, following up on a similar Nov 3 tweet.

No final decision on such a move was made at the Senate Republicans' weekly luncheon, Senator Susan Collins told reporters afterward. She played a key role in July's collapse of a years-long push by fellow Republicans to gut Obamacare, former Democratic President Barack Obama's signature healthcare law, formally known as the Affordable Care Act.

"I personally think that it complicates tax reform to put the repeal of the individual mandate in there," Collins said.

Asked if she would back the tax Bill if a mandate repeal were added, she said: "I'm going to wait and see."

Senator John McCain, who was also central to his party's failed Obamacare repeal earlier this year, was non-committal on putting the mandate repeal in the tax plan.

"I want to see the whole Bill before I decide," McCain said."I don't know if it makes it easier or harder."

The Senate and House of Representatives are developing separate tax-cut packages they plan to reconcile eventually and send to Trump's desk for enactment into law, an outcome Republicans are eager to achieve so they can face US voters next year with at least one major legislative achievement.

US financial markets have been watching closely, with US stocks rallying in recent months, partly on hopes of business tax cuts. They showed little reaction to Tuesday's developments.


The individual mandate requires Americans to have health insurance or pay a penalty to Washington, a provision that Republicans have long opposed as government overreach.

But the mandate plays a critical role in Obamacare by requiring young, healthy people, who might otherwise go without coverage, to purchase insurance and help offset the costs of covering sicker and older Americans.

Underscoring the devastating consequences for Obamacare if the mandate were repealed, the nonpartisan Congressional Budget Office said last week that such a change would increase the number of Americans without health insurance by 13 million by 2027.

The CBO added that mandate repeal would raise the average insurance policy premiums in the Obamacare marketplaces by about 10 per cent annually over the next decade.

Repealing the mandate would also lower the federal deficit by US$338 billion (S$459 billion) over the same time period, the CBO said, a finding that several Republican senators said influenced the move.

Eliminating the individual mandate would lower the number of Americans with health insurance, meaning the federal government would spend less on subsidising coverage for lower- and middle-income people, making that money available to pay for tax cuts.

Neither the Senate nor the House tax plans now includes repealing the mandate. But both plan would add about US$1.5 trillion over 10 years to the federal deficit and the national debt, which now exceeds US$20 trillion.

Further complicating the Republicans' tax push, the CBO said on Tuesday that any Bill adding that much to the deficit would trigger an order under Congress's "pay-as-you-go" budget rules to cut federal spending by US$136 billion in fiscal 2018.

Congressional Republicans hope to pass tax legislation by the end of the year and are moving fast, despite uncertainties.

They hold only a razor-thin 52-48 majority in the Senate. If Democrats remain united in opposition, Republicans could afford to lose no more than two senators from within their own ranks and still secure passage of tax legislation.

Aside from Obamacare, other aspects of the tax plans have met opposition. On Tuesday, the National Association of Realtors, one of Washington's most powerful lobbying groups, called the Senate and House tax Bills "an attack on homeownership and middle-class Americans." The Republican tax plans include changes to rules for deducting mortgage interest and property taxes.

Democrats have dismissed the Republican plans as deficit-expanding giveaways to corporations and the wealthy.

Representative Lloyd Doggett, a senior member of the House tax committee, said in a statement that the House tax Bill was"just a way to curry favour with Washington special interests - awarding tax windfalls to large multinational corporations and the fortunate few that sit way atop the economic ladder."

The House Rules Committee moved up to Tuesday night from Wednesday a meeting on that chamber's tax Bill, which was approved by the House tax panel last week. The rule committee usually meets shortly before final votes on legislation on the House floor.