December 13, 2017

Tax Bill Update

Tax Bill - Repeal of ACA's Individual Mandate and More

The House and Senate have each passed a version of a tax bill. Now representatives of the two chambers are meeting in a "conference committee" to negotiate a compromise bill. (Conferees are listed below.) Most of the negotiations will take place behind the scenes, although a formal meeting of the conference committee is scheduled to take place on Wednesday, December 13. Each chamber must pass the conference agreement without amendments. These votes are expected to take place either late this week or next week. See This Week: Gop Seeks to Finish Tax Overhaul (The Hill, 12/11/17).

The final bill (conference "agreement" or "report") could include any the provisions from the House or Senate bills. The net effect of the final tax bill will vary for each family. Both bills have provisions that would reduce some taxes but increase others. There are, however, some provisions in play that could have a disproportionate impact on children and youth with special health care needs (CYSHCN) and their families - most notably:

  • Repeal of the deduction of medical expenses versus expansion of the deduction: The House bill would do away with the medical-expense deduction completely. The Senate bill would temporarily allow more people the deduction by lowering the threshold for taking the deduction from 10 to 7.5 percent of adjusted gross income for 2017 and 2018. (Seniors have had the 7.5 percent threshold.) See ‘Very, Very Scary': 8.8 Million Americans Face Big Tax Hike If Republicans Scrap the Medical Deduction (Washington Post Wonkblog, 12/10/17).

  • Orphan drug tax credit: The House bill would do away with this incentive for companies to develop drugs for rare diseases. The Senate bill would reduce the credit. See The Health 202: The Orphan Disease Tax Credit May Soon Be Out in the Cold (Washington Post, 12/8/17)

  • Individual mandate: Anyone who wants to buy insurance, and must buy it on the individual market without a government premium subsidy, could be hurt if the conference agreement includes the Senate-bill provision to repeal the "individual mandate" of the Affordable Care Act (ACA). More precisely, the Senate bill would eliminate the penalty for failing to have insurance. The House bill would not change current law. The Congressional Budget Office (CBO) estimates that repeal of the mandate would lead to higher premiums in the individual market (10 percent more per year) and more people without insurance (13 million more uninsured by 2027, about 5 million of whom would have qualified for Medicaid had they sought insurance).

Good summaries of the bills' provisions can be found at: Important Differences Between the House and Senate Tax Reform Bills Heading into Conference (Tax Foundation, 12/2/17); Here's what's in the Senate tax bill - and how it differs from the House's bill (CNN Money, 12/2/17).

Regardless of the particulars, the final tax legislation will greatly increase the federal deficit, prompting congressional efforts to then reduce the deficit by cutting Medicaid, SSI, food stamps (SNAP), and other important safety net programs. In fact, congressional leadership and the president have all said they would like to move on to "entitlement reform" after the tax bill. See GOP Eyes Post-Tax-Cut Changes to Welfare, Medicare and Social Security (Washington Post, 12/1/17).

The members of the tax-bill conference committee are:

From the Senate:

  • Republicans: Hatch (UT), Enzi (WY), Murkowski (AK), Cornyn (TX), Thune (SD), Portman (OH), Scott (SC), and Toomey (PA)
  • Democrats: Wyden (OR), Sanders (VT), Murray (WA), Cantwell (WA), Stabenow (MI), Menendez (NJ), and Carper (DE)

From the House:

  • Republicans: Brady (TX-8), Roskam (IL-6th), Nunes (CA-22nd), Black (TN-6th)), Noem (SD-at large), Bishop (UT-1st), Young (IA-3rd), Upton (MI-6th), and Shimkus (IL-15th)
  • Democrats: Neal (MA-1st), Levin (MI-9th), Doggett (TX-35th), Grijalva (AZ-3rd), and Castor (FL-14th)

Outlook. The president and Republicans in Congress are very determined to get this tax legislation enacted, and chances are great that they will succeed. There is not expected to be a problem passing the bill in the House, although it is possible that a significant number of conservative House Members will have objections. In the Senate, only three NO votes will kill the bill. Only Senator Corker (R-TN), voted against the Senate version, but Senator Collins and others may have concerns about the final bill that emerges from the conference committee.

Senator Collins (R-ME) said earlier that she would not vote for the conference agreement unless two other bills are enacted first - the Alexander-Murray bill to stabilize the individual insurance market, and a Collins-Nelson reinsurance bill. See Collins' Obamacare deal faces moment of truth (Politico 12/8/17). While these bills will somewhat mitigate the negative impact of repealing the individual mandate, they will not do so completely or permanently. See The Avalere Study of the Impact of Murray-Alexander and Collins-Nelson Bills on Insurance Premiums: What It Says and Does Not Say. At the moment, there are mixed messages about whether House conservatives will be willing to vote for those bills. Even if Senator Collins does not vote for the final bill, it can still pass the Senate - with the vice-president breaking a tie - unless one more Republican decides to oppose it, and that is always a possibility.

Medicare cuts. Some reports about the tax legislation mention that the deficits it creates will lead to an automatic $25 billion cut in Medicare and some other entitlement programs (not Medicaid or SSI). Although that is true in theory, Congress can vote to stop these cuts. This would require 60 votes in the Senate, meaning that all Republicans and at least eight Democrats would have to vote to do so, but it is expected that there will be enough votes to avert the cuts.