Senate Bill is Out

Within the last 24 hours or so, the Congressional Budget Office (CBO), relying almost exclusively on Joint Tax Committee (JTC) estimates scored the House tax bill (H.R. 1 – The Tax Cuts and Jobs Act).  Here is the abridged results:

On November 9th the CBO released its update on the savings generated by the individual mandate and here are those results

In addition, the CBO estimated the repeal of the individual mandate would increase the uninsured in America as follows:

These data points set up the bill introduced in the Senate to repeal the Obama Care Individual Mandate.  While I am no expert on health care it seems timely to have a few words on:

  1. the Individual Mandate,
  2. why the Repeal is a revenue raiser for the government, and
  3. how this new twist impacts Tax Reform.

First, the Individual Mandate is the requirement for Americans to get “minimum” insurance coverage or pay a penalty.  This is a largely disliked policy by the so called “indestructibles”… people like my son who if left to his own devises would save the cash and not be insured because they are healthy…. Really … I’ve had that conversation with (my son) Brad….

Second, the repeal of the mandate is a revenue raiser because the loss of “penalty revenue” (taxing my son Brad for not buying insurance) is much less than cost of the governmental subsidy of insuring  this group.  See the above table “Estimate of Net Budgetary Effects of Repealing the Individual Mandate”.  In fact the repeal would put in excess of $54 billion annually into to the all-important government fisc in 2028.

Thirdly, this impacts Tax Reform because, as I pointed out in my blog from yesterday, in order to not invoke the “Byrd Rule” in the Senate (requiring 60 votes to pass Tax Reform), in 2028 there can be no deficits.  The deficit on the House bill was scored at $171 billion.  Repeal of the Individual Mandate would reduce that 2028 deficit down to $117 billion or so (my math nobody has scored this yet).  This means to pass tax reform without invoking a 60 vote majority, the budget hole just shrunk a whole bunch.

Now for some politics.  Have you ever seen the movie “Thelma and Louise”?  The plot follows two hard luck women (played by Susan Sarandon and Glenda Davis), who are running away from trouble at home.  Unfortunately, they find themselves on the “lamb” (in a major way) to keep their economic lives in order and to avoid coming home.  The movie ends tragically as they crash their car to avoid police.  Senator Chuck Schumer (D – NY), upon hearing of the Individual Mandate repeal bill, remarked “Thelma and Louise are warming up the car”.

The Republican dissenters (September 2017) to the earlier Republican bills to repeal and replace Obama Care are Senators McCain (R – AZ), Collins (R – ME), and Murkowski (R – AK).  As part of that bill, the Individual Mandate was to be repealed.  Will they (and 50 other Republicans) sign on to the repeal of the Individual Mandate, and invite the barrage of Democratic charges of “taking” insurance from 13 million Americans (see the last table above) in order to give tax breaks to the “wealthy”?  Unless they do, the choices for tax reform get down to:

  1. Changing the final bill must to be substantially different than its current construct (a.k.a. less tax breaks, higher business / corporate rates), or
  2. Finding 8 Democrats to join 52 Republicans in the Senate (impossible) , or
  3. Destroy the Byrd rule (which will likely take time and decrease the power of minority parties in the Senate)… and Republican Senators … who have lived in the weeds since I was young… hate to give this up… as … they know one day they may need a filibuster..   .

What you may not know, is Obama Care promised subsidies to insurance companies participated in the Affordable Care Act (ACA).  The subsidies, known as cost-sharing reduction payments, reimburse insurance companies for lowering deductibles, co-payments and other out-of-pocket costs for low-income customers.  When the Democrats were swept from Congress in the mid-term elections in 2010, the Republican majority stopped funding these subsidies.  Not to be outdone, President Obama paid the subsidies out of the Executive Branch anyway.  (Court battle royal ensued).

As you can imagine, President Trump has refused to write the check to the insurance companies who are freaking out and promising large premium hikes to stop the red ink.  (Nobody weeps for insurance companies, accountants, or lawyers) …   Enter Senators Murray (D – WA) and Alexander (R- TN), who proposed a bill to fund the insurance companies .

Will there be a grand compromise in the Senate over the insurance company funding and the Individual Mandate as part of tax reform?  Will some Democrats join?

I am a pessimist so here are 5 reasons why Tax Reform will not pass:

  1. Without the cash from the Mandate Repeal, the Byrd rule takes effect.
  2. The more stuff you need to pass to make it work…  the harder it is to pass.  It is a conundrum.  It seems like Congress has a 5 pound bag to contain 10 pounds of @!#$%&*!
  3. The House is going to sit until the Senate votes are there.  Already today Paul Ryan was calling for the Senate to “take the lead” on Tax Reform.  Time is no friend to Tax Reform that has no bi-partisan support.
  4. Even though this is “Tax Reform”, the word “repeal” is a rarely used term in each tax bill.
  5. Republicans are probably feeling like “Thelma and Louise” on Health Care.  Yet another loss on the issue (Individual Mandate repeal), helps the cement harden on Obama Care.

Here are 3 reasons why it will pass:

  1. The Alexander – Murray bill will provide sufficient political grease to allow for the passage of the Individual Mandate repeal.
  2. The repeal of the mandate and adoption of the more conservative phase-ins of tax reform, will stave off the invocation of the Byrd rule.
  3. McCain, Collins and Murkowski won’t stand in the way of tax cuts.


Until I see the Senate votes, to quote Stevie Wonder (the world’s second most awesome blind piano player next to Ray Charles):

Bill Collier

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