While I’ll admit my tendency to assault readers with budget minutiae, I rarely take you too far down into the weeds. But there’s something weedy going on that I want you to know about. To compensate for the pain, I promise you some fun riddles at the end.
Today, the House Republicans are voting on what I consider their awful health-care replacement plan for the Affordable Care Act. I’ve already explained my negativity about the highly regressive American Health Care Act.* If you think the problem is that the wealthy don’t have enough after-tax income and the poor have too much health care, this is the plan for you. A new analysis from the nonpartisan Tax Policy Center shows that 70 percent of the bill’s tax cuts go to families with incomes above $200,000; 46 percent to millionaires and up; while three-fourths of the benefit cuts hit families with incomes less than $30,000.
[*A number of us have wondered why they gave their act such a generic name, so close to that of the ACA. Wouldn’t you have expected something like “The Freedom from the Tyranny of Affordable Coverage Act?”]
The bill may well pass the House, based simply on the calculus that if House Speaker Paul D. Ryan (R-Wis.) didn’t have the votes, he wouldn’t let the bill go to the floor for a vote. But there’s no question that both the politics and policy of health-care revision are hard, much harder than tax cuts.
So why then did the Republican Congress decide to revise health care first, before tax cuts? Most of us following the legislative process can’t tell you where health care lands. But I’m certain a tax cut is coming. Why are Republicans making their lives harder by starting with a complicated health-care replacement plan, one that itself conflates health policy with tax cuts?
The answer, as tax analyst Chye Ching Huang points out in a new piece, is that “passing the health package first facilitates deeper tax cuts for the wealthy and corporations in subsequent tax legislation.”
You might have thought that the ACHA’s tax cuts for the rich and spending cuts for the poor slake the conservatives’ thirst for upward redistribution. If so, you’ve underestimated their greed. They intend to make two trips to the well of tax cuts, and Trip 1 paves the way for Trip 2.
The ACHA cuts taxes by almost $900 billion over the 10-year budget window within which these things are scored by official budget scorekeepers. To avoid a Senate filibuster, which would allow Democrats to block either the health-care or tax bills, both must be scored as not adding to the 10-year deficit.
So, here’s Huang’s punchline: “If these tax cuts were part of tax reform legislation rather than being in the health bill, Republican leaders would have to offset their cost on the tax side to maintain revenue neutrality … limiting how sharply they can cut tax rates.”
In other words, by moving health care first, the R’s lower their revenue target for tax revision. If the tax cuts for the rich in the ACHA were in tax reform, complying with budget rules would require hundreds of billions more in offsets. “But if lawmakers enact and pay for these large tax cuts before tax reform – with Medicaid cuts, in the case of the House plan – they won’t have to pay for their long-run cost in tax reform. And as Ryan notes, by cutting taxes sharply through health legislation and not having to pay for those tax cuts in tax revision, Republicans could cut corporate tax rates by something like an additional 10 percentage points.”
Can’t you just picture the high-fives in the boardrooms when they heard that? So, there you have it. That’s why sequencing matters here, and health care must go first. Okay, you’ve eaten your budget spinach, so here’s dessert:
What did Buddha say to the hot dog vendor? “Make me one with everything.” What did the vendor say when Buddha asked for his change? “Change comes from within.” What did the D.C. hot dog vendor answer when the tourist asked her “how much does a hot dog cost? “Whatever CBO says it costs.” Okay – I’ll stop. My bad.