For the first time, Republicans senators are openly contemplating keeping billions of dollars of Obamacare taxes in their health bill.
Since Speaker Paul Ryan first introduced the House’s Obamacare repeal and replacement bill in January, the GOP plan has been to cut Medicaid by hundreds of billions of dollars and direct those savings into tax cuts that mostly benefit the rich. But now the pendulum could be swinging the other way.
Several Republican senators on Wednesday expressed discomfort with giving such a large tax break to the most affluent Americans in a bill that will lead to 22 million fewer people having health insurance than under Obamacare.
South Dakota Sen. Mike Rounds said Wednesday that at a lunchtime meeting of the Republican conference he brought up the idea of keeping an Obamacare tax of 3.8% on the investment income of the richest Americans. Preserving that tax would save $172 billion over a decade, which could be used elsewhere in the health bill.
"That particular (tax) that would have been part of the Obamacare product, I would not be afraid to have it considered to be maintained," said Rounds.
Rounds did not say what the reception to the idea was from other Republicans, and said many ideas are still being thrown around.
The Senate health bill would cut $700 billion in taxes over the next decade, according to the Congressional Budget Office. The non-partisan Tax Policy Center found that two thirds of those savings would go to the top 20% highest earners. Almost half — $313 billion — would go to the top 1%, those making $875,000 per year or more.
The top 0.1% of earners, those making more than $5 million per year, would see an average tax cut of almost $250,000, according to TPC’s analysis.
Some Republicans are now wondering if that money could be better spent elsewhere.
Rounds's proposal involves keeping one key Obamacare tax — a 3.8% tax on investment income for individuals who make over $200,000 and couples who make over $250,000 combined. This tax provision is worth $172 billion in income over the next decade, according to the CBO. All of that tax falls on high earners and over half is paid for by the top 0.1%, according to TPC.
Maine Sen. Susan Collins said Wednesday that she also supports preserving this tax. Collins said she sees it as fundamentally different than other Obamacare taxes that Republicans want to repeal — those that directly increase the costs of health care, such as a tax on medical devices.
“I understand that some of the taxes do contribute to increasing the cost of health care,” she said. “I do not see a justification for doing away with the 3.8% tax on investment income because that is not something that increases the cost of health care.”
When asked if she supports the amount of tax cuts going to rich Americans in the bill, Alaska Sen. Lisa Murkowski expressed opposition but didn’t get into specific tax provisions. “I don’t like the way that things (in the bill) are split,” she said.
Keeping the tax would give Senate leadership additional money to use to try to win over the nine members who have publicly opposed the bill, as written. Additional funding for Medicaid, insurance subsidies and opioid addiction treatment could help win over moderates.
But preserving even a portion of Obamacare taxes will draw major pushback from more conservative elements of the Republican conference, who already argue that the bill does not do enough to fully repeal the Affordable Care Act. Sens. Rand Paul, Ted Cruz and Mike Lee are among the most vocal voices pushing for wholesale repeal, but opposition would likely run much deeper.
“Last time I checked, a lot of Republicans for seven years said they wanted to repeal Obamacare and I’m one of them,” said Pennsylvania Sen. Pat Toomey. “It’s done a lot of damage to economic growth by taxes that impede growth… so like most Republicans I know I’m in favor of repealing all of it that I can. That includes the taxes.”
Keeping Obamacare taxes would also be a tough pill to swallow for the conservative House Freedom Caucus, who were hugely influential in shaping the House version of an Obamacare repeal and replacement bill and will be needed to support a final unified bill.
This is just one of several policy battles that is pulling the Senate GOP conference in different directions. Senate leadership had to postpone a planned vote on the Senate health bill this week, acknowledging that they did not yet have the votes to pass their own health care bill.
CORRECTION
An earlier version of this story stated that Sen. Rounds had asked leadership to get a CBO score for the idea of keeping the 3.8% investment tax. In face, he had asked for a score on a separate proposal involving including group insurance in the bill's tax credit system.