Health failure could impair tax overhaul
By Stephen Ohlemacher
WASHINGTON — House Republicans’ failure to repeal Barack Obama’s health care law deals a serious blow to another big part of President Trump’s agenda: tax reform.
Trump and House Speaker Paul Ryan, RWis., say they will soon turn their attention to the first major rewrite of the tax code in more than 30 years. But they will have to do it without the momentum of victory on health care.
Just as important, the loss on health care will deprive Republicans of $1 trillion in tax cuts.
The GOP health plan would have repealed nearly $1 trillion in taxes enacted under Obama’s Affordable Care Act. The bill coupled the tax cuts with spending cuts for Medicaid, so it wouldn’t add to the budget deficit.
Without the spending cuts, it will be much harder for Republicans to cut taxes without adding to the federal government’s red ink.
“Yes this does make tax reform more difficult,” Ryan said. “But it does not in any way make it impossible.”
“That just means the Obamacare taxes stay with Obamacare. We’re going to go fix the rest of the tax code,” he added.
House Republicans couldn’t round up enough votes Friday to repeal and replace a law they despise, raising questions about their ability to tackle other tough issues.
Rep. Jodey Arrington, R-Texas, acknowledged that Friday’s turn of events made him doubtful about the Republicans’ ability to tackle major legislation.
“This was my first big vote and our first big initiative in the line of things to come like tax reform,” the freshman said. “I think this would have given us tremendous momentum, and I think this hurts that momentum.”
Nevertheless, Treasury Secretary Steven Mnuchin said the administration plans to turn quickly to tax reform with the goal of getting an overhaul approved by Congress by August.
“Health care is a very complicated issue,” Mnuchin said. “In a way, tax reform is a lot simpler.”
Don’t tell that to House Republicans who have been struggling with the issue for years. Their general goal is to lower income tax rates for individuals and corporations, and make up the lost revenue by reducing exemptions, deductions and credits.
Overhauling the tax code is hard because every tax break has a constituency. And the biggest tax breaks are among the most popular. For example, almost 34 million families claimed the mortgage interest deduction in 2016, reducing their tax bills by $65 billion.
Also, more than 43 million families deducted their state and local income, sales and personal property taxes from their federal taxable income last year.
House Republicans have released a blueprint outlining their goals. It would lower the top individual income tax rate from 39.6 percent to 33 percent, and reduce the number of tax brackets from seven to three.