House Republicans aired concerns that the failure of healthcare legislation Friday will hinder the push for tax reform, the next major item supposedly on the GOP docket.
Even apart from political considerations, GOP lawmakers fear that the failure of the Obamacare repeal measures makes it more difficult to push tax reform on the scale that they hoped because of the fiscal arithmetic involved.
“Yes, this does make tax reform more difficult,” House Speaker Paul Ryan acknowledged in a press conference Friday. “But it doesn’t in any way make it impossible.”
The key consideration is that the Obamacare replacement measure would have cut tax revenues by roughly $1 trillion over 10 years. Lowering the baseline for tax revenues would mean that Republicans, seeking to cut tax rates without adding to the deficit, would have to cut fewer tax breaks to make up the lost revenue.
“This was really important, especially for setting up tax reform,” Rep. Andy Barr, R-Ky., said in the moments after the healthcare bill was pulled. “Remember, this would have lowered the baseline for tax reform by a trillion dollars.” The bill’s failure, he said, “makes tax reform harder.”
Nevertheless, President Trump said Friday that they were proceeding with tax reform as the next major agenda item. “We will probably start going very, very strongly for the big tax cuts and tax reform,” he said at the White House. “That will be next.”
Rep. Kevin Brady, chairman of the House Ways and Means Committee responsible for part of the Obamacare repeal as well as tax reform, said Friday that his committee is “moving full speed ahead with President Trump on the first pro-growth tax reform in a generation.”
Brady has insisted the the committee has been working on tax reform at the same time as healthcare and making progress.
Rep. Kenny Marchant, R-Texas, a member of the panel, said the committee would meet Tuesday morning to discuss the path forward given the failure of the healthcare bill and its implications for tax revenues.
How to seek a tax overhaul with a higher tax revenue baseline likely would be the topic of discussion, he said.
“We’re going to have to re-look at the math and set our goals based on a different math, but I think it’s still doable,” Marchant said.
One major takeaway could be that rate reduction goals set by Republicans might now be out of reach. The House Republican plan sought to lower the top individual tax rate to 33 percent and the corporate tax rate to 20 percent, down from 35 percent now.
For months, Republicans have warned that the healthcare legislation was necessary to ease tax reform because of the lower baseline it would create.
Some outside experts have questioned that logic, however.
If Congress simply leaves the taxes included in Obamacare in place, budget experts have suggested, the math of reforming the rest of the tax code isn’t affected one way or another. Obamacare included new taxes on health plans, medical devices, investment income for high earners, and more, all of which Republicans had pledged to repeal.
Ryan appeared to endorse that fiscal accounting in his press conference Friday afternoon.
The failure of the healthcare legislation “just means the Obamacare taxes stay with Obamacare,” he said. “We’re going to go fix the rest of the tax code.”
