Mulvaney Says It Would Be OK to Drop Mandate Repeal in Tax Plan

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The White House wouldn’t oppose removing from the Senate tax plan a controversial provision to repeal the individual health care mandate of the Affordable Care Act, budget director Mick Mulvaney said, a move that could help secure the vote of key Republicans.

The provision could be dropped if it becomes “an impediment,” Mulvaney, head of the Office of Management and Budget (OMB), said on CNN’s “State of the Union.”

“If we can repeal part of Obamacare as part of a tax bill and have a tax bill that is still a good tax bill that can pass, that’s great,” he said. “If it becomes an impediment to getting the best tax bill we can, then we’re OK with taking it out.”

(Related: Muddled White House Tax Message Clouds Pitch for Trump Plan)

On CBS’s “Face the Nation,” Mulvaney said the White House “would love to see Obamacare taken apart all at once, bit by bit, however we can do it,” but that if the mandate repeal “needs to come out in order for that good tax bill to pass, we can live with that as well.”

White House legislative director Marc Short said the administration approves of the Senate’s move to include the repeal of the individual mandate in its bill because it’s a tax that predominately affects those earning $50,000 a year or less.

“The White House is very comfortable with the House bill,” Short said on ABC’s “This Week” on Sunday. “We also, though, believe the individual mandate is a tax, and it is harming middle-income families the most. So we like the fact that the Senate has included it in its bill.”

Mulvaney made three appearances on Sunday political talk shows. Treasury Secretary Steven Mnuchin and Short also spoke, reflecting the Trump administration’s full-bore attempt to sell the Republican tax plans now working their way through Congress.

No ‘Bargaining Chip’

Mnuchin said the individual mandate repeal hadn’t been added to the Senate bill as a bargaining chip that could be removed later if it risked costing the votes of key Republican senators such as Susan Collins of Maine and Lisa Murkowski of Alaska.

Sen. Susan Collins, R-Maine (Photo: Collins)

Sen. Susan Collins, R-Maine (Photo: Collins)

“This isn’t a bargaining chip,” Mnuchin said on “Fox News Sunday.” “Right now our objective is to keep it in,” he said, adding that “we’re going to work with the Senate as we go through this.”

The individual mandate, a key element of the Affordable Care Act, requires most Americas to obtain health insurance or pay a fine. Repealing it in the Senate plan would give Republicans more revenue to work with in their tax-cutting efforts because fewer people would buy insurance and receive federal subsidies to help pay for their coverage.

If no Democrats vote for the Senate bill, Republicans can afford to lose only two votes and still pass it under Senate rules.

‘Needs Work’

Collins said Sunday on ABC that the bill passed by the Senate Finance Committee “needs work” when it comes to the Senate floor, and that the decision to include the individual mandate repeal was a mistake. Asked if she can vote for the measure as written, she said “I haven’t reached that conclusion yet, because I think there are going to be further changes.”

Collins said she’s concerned about premiums increasing if the mandate is removed and isn’t mitigated by legislation to stabilize the Affordable Care Act public exchange system.

“It’s a problem for me if it is not mitigated,” Collins said. She said she also wants to keep the top individual income-tax rate at the current 39.6% and that the state and local tax deduction, targeted for elimination in the Senate bill, should be continued.

Sen. Tom Cotton of Arkansas said on Fox’s “Sunday Morning Futures” that the mandate should be eliminated because lower-income people are still getting subsidies to reduce their premiums.

“The vast majority of people on the Obamacare exchanges are getting subsidies,” Cotton said. “So if their premiums do go up, they’re still going to get higher subsidies.”

Tight Schedule

House Republicans passed their plan — which didn’t include the individual mandate repeal — on Thursday afternoon. Later that night their colleagues on the Senate Finance Committee approved a far different version that postpones difficult questions as lawmakers rush to refashion much of the U.S. economy on the tight schedule demanded by President Donald Trump.

Republican leaders plan to bring the tax bill to the Senate floor for consideration when they return from the Thanksgiving recess.

Some Republican senators have expressed concern about the plan. One, Sen. Ron Johnson, has said he can’t support the proposal as written because of its treatment of taxes for small businesses for so-called pass-through businesses — and Mulvaney said the Wisconsin lawmaker has a point.

Sen. Ron Johnson, R-Wis. (Photo: Johnson)

Sen. Ron Johnson, R-Wis. (Photo: Johnson)

Pass-through businesses include partnerships, limited liability companies and “S corporations” — businesses that are closely held and vary in size and purpose from mom-and-pop convenience stores to nationwide retailers or large-scale manufacturers. They also include law firms, accounting firms and investment firms.

“Senator Johnson has sort of honed in one thing that we knew was sort of the last big substantive piece of the puzzle, and that’s how do you deal with these pass-through entities, S-corporations, LLCs, and partnerships,” Mulvaney said on CBS.

Business Taxes

“They’re taxed differently than C-corporations. And they’re taxed at the individual level. So, when you start to lower the corporate tax rate, it’s arguably putting S-corporations at a disadvantage. And that needs to be worked out,” he said.

If passed, lawmakers from the House and Senate would attempt to compromise on significant differences between their two versions on the treatment of deductions and other elements, with the goal of having a final bill to Trump by year-end.

Sen. Roy Blunt, a Missouri Republican, said on NBC’s “Meet the Press” that the two plans are “very reconcilable.”

The House bill, passed on a party-line vote, would lower the corporate tax rate to 20% from 35%, shrink the number of individual tax brackets to four from seven, and scrap many popular tax breaks and deductions. Several Republicans from districts in high-tax states, including New York and New Jersey, voted against the plan.

Deficit Impact

Critics say both plans would drive up the federal budget deficit, despite assertions from the White House and many Republican lawmakers that tax cuts would pay for themselves over time by increasing economic growth. Some independent studies dispute that, prompting critics of the tax plans to say they’ll soon spur urgent calls for spending cuts.

“It’s just not economically rational” to say that the plans would increase the federal deficit, Kevin Hassett, the chairman of the White House Council of Economic Advisers, said at the daily White House briefing on Friday.

The conservative-leaning Tax Foundation, a Washington policy group, said earlier this month that the House’s tax bill would cost $1.98 trillion over a decade compared with current law. About half of that may be offset by higher growth, the foundation estimated.

Meanwhile, the Penn Wharton Budget Model at the University of Pennsylvania found that, after accounting for larger economic effects, the House bill would “reduce revenues between $1.5 trillion and $1.7 trillion” over 10 years. The Senate plan would reduce revenue by $1.4 trillion to $1.7 trillion, the model found.

—With assistance from Randall Woods.

—Read House Passes Its Tax Bill; Senate Finance OKs Senate’s Bill on ThinkAdvisor.

— Connect with ThinkAdvisor Life/Health on Facebook and Twitter.

Copyright 2017 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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