House Republicans bused to a nearby retreat on Wednesday to unveil the framework for their forthcoming tax reform plan — just one day after Republican leaders confirmed that the Senate would not be holding a vote on Graham-Cassidy, the last remaining health care bill.
Republicans have not so subtly signaled they’re giving up on the Obamacare repeal push for now. On September 30, Congress’s current “budget reconciliation” instructions for 2017, which allowed the Senate to pass the health care bill with a simple majority rather than 60 votes, will expire. The 2018 budget reconciliation instructions were always intended to be used for tax reform. There were some rumblings about including health care reform in the next round as well, but that now seems to be a vanishingly small possibility.
Even the conservative members most adamant about repealing Obamacare have now turned to tax reform.
“Since we have made two runs at repeal and replace, to jeopardize tax reform would not be prudent,” Rep. Mark Meadows (R-NC), chair of the conservative House Freedom Caucus, which even tried to force a chamber vote on clean Obamacare repeal, said.
In all, Republicans are pushing to make a tacit admission that after campaigning on repealing Obamacare for seven years, they will have to sideline their Republican-led health care efforts for the time being. The priority is now tax reform.
Republicans don’t want another health care fight to derail tax reform
Senate Republicans sponsoring the currently stalled Graham-Cassidy proposal aren’t letting go of a Republican-led health care push, but the idea of tacking on health care to tax reform was met with little patience in the rest of the caucus.
“We have been talking about health care for nine months now,” Sen. David Perdue (R-GA) said. “My focus right now is to get a tax bill. The president wanted it first this year, and he got talked out of it by some people up here that thought we could deliver health care earlier in the year, and, well, now we have run through nine months … we’ve got to get tax done.”
Republicans want to make clear that they are not abandoning the dream of repealing Obamacare, but it seems after of months of repeated and demoralizing failure, they have convinced themselves that tax reform will be a fruitful exercise to bring the party back together.
Tax reform, Perdue said, is “job one.”
His concerns were echoed among top Republicans, who said trying to attach health care to tax reform would doom the process from the start.
“I think we ought to leave the health care debate for a different track,” Senate Majority Whip John Cornyn said Tuesday. “Sen. [Lamar] Alexander and Sen. [Patty] Murray are working on some different ideas stabilizing the market. More importantly to me, Sen. Graham and Sen. Cassidy are looking [at] structural reform … that discussion continues, but we will be pivoting in the near term toward tax reform.”
Trying to accomplish both at once would only exacerbate some of the budgetary limitations that made health care reform so challenging — most notably how a joint health and tax bill would impact the deficit. A budget reconciliation bill cannot dramatically increase the deficit over 10 years, or the tax cuts in the bill will sunset. Repealing Obamacare’s taxes would become problematic, and spending cuts like dramatic hits to Medicaid have proven to be politically unviable in the Senate.
Already, as Vox’s Dylan Matthews explained, Republicans are having to deal with their tax proposal’s impact on the deficit in creative ways, assuming an unrealistic economic growth rate.
“It’s obvious if we are going to get robust tax reform, we are going to have a deficit conversation,” Meadows said — one that could get more complicated with the addition of Obamacare repeal.
“Obviously if it is something you can do and not jeopardize tax reform, then certainly I am willing, but at this point, the revenue numbers probably overlay too much to allow us to go on parallel tracks.”
In other words, tax reform is the priority.
The assumption is tax reform will be easier to notch a legislative win
Republicans are under the impression that tax reform is a much more “natural fit” for the majority party than health care ever was.
“I believe it’s going to be far easier for us to do tax reform than it was, say, for health care reform,” House Speaker Paul Ryan said during a CNN town hall in August. He said there’s more consensus in the party around tax reform and that the Senate rules that hindered the health care debate won’t play as big a role in the tax reform debate.
But Ryan’s optimism might be tempered by early conversations over tax reform, which already indicate some division within the party.
Republicans are unified in their goal to cut taxes, but they are already locked in an intraparty struggle of how deeply to cut rates — and whether to offset those cuts at all. Already one of Ryan’s proposals to offset costs — the border adjustment tax, which would tax foreign imports and exempt exports, raising money because the US currently imports more than it exports — has been nixed amid widespread opposition among congressional Republicans.
“I’m getting nervous about tax,” Perdue said. “We lack focus sometimes here. I haven’t seen a tax bill yet, so we have a lot of work to do [to get] tax reform done.”
Republican leadership is unveiling their tax reform outline Wednesday. House conservatives in the Freedom Caucus have already hinted they will come out with a position on the framework by Wednesday evening. So far, Meadows has set some personal red lines around tax rates, saying he would vote against a bill that had a corporate rate above 20 percent or a small-business tax rate above 25 percent — both of which are possibilities. The plan is to leave the bill writing up to the committees.
As for health care, “we sometimes forget that we have a 2019 reconciliation,” Meadows said.
Join the conversation
Are you interested in learning more about tax reform? Join us for a tax reform Q&A with economist Jared Bernstein, senior fellow at Center on Budget and Policy Priorities and former Chief Economist and Economic Adviser to Vice President Joe Biden, on September 29 at 2 PM in The Weeds Facebook group. RSVP to the Facebook invite to receive a reminder notification on Friday.