Republicans are determined to pass budgets this week that are balanced and repeal Obamacare. Democrats are just as eager to undermine the GOP’s claims that their budgets balance by calling them “gimmicks.”
The biggest gimmick, according to Democrats, is that Republicans would repeal Obamacare but maintain the roughly $1 trillion in revenue that comes from Affordable Care Act taxes.
“While claiming to ‘repeal Obamacare’ and stripping away health coverage from millions, the Republican budgets retain the ACA’s savings, claiming they will replace the revenues through unspecified tax reforms,” the White House said in a report on the GOP House and Senate budgets Tuesday.
Sen. Chuck Schumer of New York, the number-three Democrat in the Senate, pointed out in an email to reporters that the Republican budgets rely on revenue generated by the law. “Fuzzy math, sleight of hand, and arithmetic acrobatics can disguise but not change the fact that the Republican budgets would devastate programs that the middle class relies upon,” Schumer said.
The Obamacare repeal provision is not the only feature of the GOP budgets that Democrats have criticized as an accounting trick, but it is the most consequential one.
The health care law included a litany of tax increases, including a 3.8 percent surtax on investment income for high earners, a payroll tax hike for high earners, taxes on people who do not buy health insurance, an excise tax on medical devices, and taxes on indoor tanning.
Although Republicans have endlessly criticized those individual taxes as job-killers, they maintain that it is legitimate to raise the same amount of revenue through tax reform.
“Our budget repeals every bit of Obamacare including the job-destroying tax hikes. At the same time we call for fundamental tax reform that would raise the same level of revenue as the current tax code but in a fairer, simpler fashion,” said William Allison, a spokesman for House Budget Committee Chairman Tom Price of Georgia.
It’s a criticism the GOP has heard in previous budget battles and one that Price anticipated during the roll-out of the budget, and the Democrats have kept up their attacks on the Obamacare “gimmick” in both the Price budget and the Senate version introduced by Sen. Mike Enzi of Wyoming last week.
They are aided by the lack of detail in the GOP budgets, which lay out extremely broad outlines for tax reform. The Price budget calls for a reduction in tax rates, repealing the Alternative Minimum Tax, and moving to a territorial system for international taxation, that is, one that taxes U.S. companies only on income earned within the U.S.
It also specifies that revenue should be kept at the current baseline projected by the Congressional Budget Office, which assumes it will grow from about 17.5 percent of gross domestic product this year to 18.2 percent in 2025, and then ultimately up to 19 percent.
Instead of specifics, the details of the tax reform plan are left to the tax-writing committees to figure out. In the House, that leaves the details up to Rep. Paul Ryan, R-Wis., the former Budget Committee chairman who also drew Democratic criticism for repealing Obamacare but keeping the current baseline in the budgets he wrote. A spokesman for Ryan declined to respond to the Democratic criticisms.
In the absence of details from Republicans on the tax plan, Democrats have been happy to provide their own, and to claim that the math wouldn’t work.
Rep. Chris Van Hollen of Maryland, the ranking Democrat on the Budget Committee, has said that the House budget calls for the “Romney-Ryan tax cut plan” from the 2012 GOP presidential platform. That plan, Democrats said at the time, would cut taxes for the rich by adding to the deficit or raising taxes on the middle class.
Democrats also have criticized the House version of the plan on the presumption that its tax reform plan would rely on dynamic scoring to raise enough revenues to match current projections, effectively using a budget gimmick within a budget gimmick. Dynamic scoring is an accounting method in which the added revenues from faster economic growth are factored into an estimate of tax legislation. House Republicans made dynamic scoring the norm for big bills this year.
Asked at a press conference about the assumption that the GOP tax plan would raise enough revenue to meet the current baseline, Price faltered slightly, saying that it was justified because “we believe in the American people and we believe in growth.”
But he also argued that simply spurring economic growth back to the 40-year average would result in $3 trillion in added revenue, more than offsetting the lost Obamacare taxes. “The tax reform that we’ve identified and the proposals that we’ve put forward, we believe, will result in significant increase in growth,” Price said.
Ryan Ellis, the director of tax policy at the conservative advocacy group Americans for Tax Reform, defended the idea that the GOP could write tax legislation to raise revenue at the current baseline. “All sorts of provisions will be changed, including repeal of the Obamacare taxes. Lots of moving parts within tax reform,” EIlis told the Washington Examiner.
Americans for Tax Reform is the group that maintains the taxpayer protection pledge signed by most Republicans, in which they promise not to raise taxes.
Using the current law baseline is justified, Ellis noted, asking rhetorically if Republicans also should have to account for the changes to the baseline made by the fiscal cliff deal, the Clinton tax hikes, or the George H.W. Bush tax hikes. “At some point, the current law revenue baseline is what it is,” he said.
