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White House Doubles Down on Reforming Healthcare First

Posted on April 13, 2017 by Jonathan Curry

Following President Trump's comments on wanting to revert legislative focus from tax reform to healthcare reform, the White House’s budget chief confirmed the administration’s pivot, leaving the status of tax reform in question.

In an interview that aired on Fox Business Network April 12, Trump denied that Republicans had “failed with healthcare,” saying that negotiations are still ongoing and that “we have to do healthcare first to pick up additional money so that we get great tax reform.”

He added, “I want to do it first to really do it right. And after that, we’re going to start on tax reform and infrastructure.” However, the president also suggested that if the healthcare reform effort stalls again, he would go back to pursuing tax reform. And unlike the first effort by the administration to pass a healthcare bill, Trump said this next attempt wouldn’t come with a firm deadline.

Trump issued an ultimatum March 23 to House Republicans, insisting they vote on the the American Health Care Act the next day. When the bill was withdrawn prior to the vote due to a lack of support, Trump and Republican leaders like House Speaker Paul D. Ryan of Wisconsin and Ways and Means Committee Chair Kevin Brady of Texas announced their intent to pivot to tax reform.

In another interview, Trump told The Wall Street Journal April 12 that Democrats might be more willing to engage in healthcare reform discussions if the administration stopped making payments to health insurers through the ACA’s cost-sharing reduction program, though he acknowledged that such a move could backfire. Ending the subsidies, which are paid out of funds appropriated by Congress to the IRS for healthcare premium tax credits, would have a destabilizing effect on the individual health insurance market.

Trump’s pivot was echoed by Office of Management and Budget Director Mick Mulvaney during an April 12 interview on CNN. “Generally speaking . . . the plan is still to try and do healthcare first,” he said, adding that Congress’s “strange rules” for measuring the fiscal impact of legislation would make it easier to do tax reform after healthcare reform. And politically, a successful repeal of the Affordable Care Act would help the White House build momentum for tax reform, Mulvaney said, as would getting rid of some of the ACA taxes, like the medical device excise tax.

He also mentioned the White House’s displeasure with how the House handled the earlier effort to replace the ACA, saying it has issues that need to be resolved internally.

AshLee Strong, a spokeswoman for Ryan, suggested that House Republicans would be willing to get behind the president’s effort, telling Tax Analysts that GOP lawmakers have “consistently articulated the advantages of doing healthcare reform before tax reform.”

Marc Goldwein of the Committee for a Responsible Federal Budget acknowledged that there are political rationales for wanting to do healthcare reform first, but he was skeptical of the budgetary reasons put forth by Republicans.

“There’s no revenue baseline issue here,” he told Tax Analysts. “To the extent there’s an issue, it’s that they might want to do the ACA taxes no matter what first, and to the extent that they don’t pay for them with healthcare reform, they then have to pay for them with tax reform and that does make tax reform harder.” But Goldwein pointed out that they could, as Ryan has suggested, still do tax reform first, and save repeal of the ACA taxes for healthcare reform.

One practical reason for why Republicans might want to go back to doing healthcare concerns sequencing and the budget reconciliation process, Goldwein said. “The process reason is that once they go on to the next [fiscal 2018] budget resolution on tax reform, they can’t go back and use this [fiscal 2017] resolution for health reform. So they’d actually have to wait a whole other year and do another budget resolution,” he said.

‘Policy-Assertive’ White House

Mulvaney suggested that the White House would take a more prominent leadership role in handling some of the big-ticket legislative items, like tax and healthcare reform and infrastructure.

In an April 12 interview on CNBC, Mulvaney said the White House would come up with its own tax reform plan that "we are going to take down to the Hill and try to sell," though he added that they had not yet finalized it. The White House would be “much more policy-assertive” than before, he said.

Mulvaney also said that he wasn’t concerned with tax reform being revenue neutral. “Letting people keep more of their money . . . is the most efficient way to actually allocate resources,” he added. “I’m really not interested in how tax reform handles the deficit.”

Though the administration says it will be more assertive on tax policy, Republicans in Congress seeking direction from the White House may have to wait a while. Speaking April 12 with The Wall Street Journal, Trump was asked if he would release a set of tax reform guidelines for lawmakers to use to begin drafting legislation, to which he replied, “No.”

Strong meanwhile said that House Republicans would continue to seek a unified GOP tax plan.

Tax Semantics

During his April 12 interview, Trump also discussed the controversial border-adjustable tax proposed by House Republicans, but didn’t make clear if his concerns about the proposal had more to do with semantics or substance.

“I don’t like the term ‘border adjustment,’” Trump said. “When I hear border adjustment, adjustment means we lose.” But when asked if he supported some sort of tax at the country’s border, Trump said he loves "the idea of reciprocal,” adding that it could instead be called an import tax, a reciprocal tax, a matching tax, or a mirror tax.

“The funny thing is that nobody gets angry when you say reciprocal tax,” Trump said. But, he noted, “When you say I’m going to charge a 10 percent or 20 percent border tax, everyone goes crazy because they like free trade.”

Brian A. Dodge of Americans for Affordable Products, a coalition of businesses opposing the border-adjustable tax, took Trump’s unclear comments as an answer in itself. Trump "once again had an opportunity to speak favorably about the border adjustment tax and he once again passed on doing so,” Dodge told Tax Analysts. “We will have to wait to see exactly what a reciprocal tax looks like, but we can safely assume that is different, possibly substantially different, from the House-proposed border adjustment tax.”