GOP Tax Plan Would Scrap ‘Individual Mandate’ and Raise Premiums
Senate Republicans’ tax reform proposal and their plans to repeal the individual mandate are the “same sort of cynicism,” says economist Dean Baker
SHARMINI PERIES: It’s The Real News Network. I’m Sharmini Peries coming to you from Baltimore. Senate Republicans announced on Tuesday that their version of Trump’s tax reform will include a repeal of the individual mandate that is part of Obamacare. This mandate, which was passed back in 2010 under the Affordable Care Act, requires every U.S. citizen to have health insurance. Republicans say eliminating the mandate will reduce government spending and thus reduce the overall cost of tax reform.
A second announcement Republicans made with regard to their tax reform plan is that corporate tax reductions will be permanent and the individual income tax reduction will be limited to eight years.
On to discuss the Republican tax reform proposal is Dean Baker. Dean is co-director of the Center for Economic and Policy Research and author of the book, Rigged, How Globalization and the Rules of Modern Economy Were Structured to Make the Rich Richer. Dean, good to have you back.
DEAN BAKER: Thanks for having me on.
SHARMINI PERIES: Dean, what do you make of the Republican argument that eliminating individual mandate would save taxpayers money?
DEAN BAKER: This is just a level of cynicism that, I don’t know, I guess nothing should surprise me, I’ve been watching a quarter-century. The basic point here is the reason you have the mandate is for people who are relatively healthy, they might decide to go without insurance. For some of those people, that could well make sense. What you’re saying is no, you have to get the insurance and if you don’t, you pay a penalty. That’s the nature of it.
It gets more people to buy insurance, the savings is due to the fact that many of those people who buy insurance are actually getting subsidized on their insurance, so we will save money on the subsidy. The estimate of the Congressional Budget Office is 15 million fewer people would buy insurance, so they will go without insurance. That’s a big deal.
The more important part of the story is that this is about making the insurance market work, because these are relatively healthy people, which means that they don’t cost the insurers very much money. If you take those people out of the pool, then everyone else will have to pay much more money, which means we’re back at the situation we were pre-Obamacare, where you had millions of people with health conditions who either could not get insurance at all, or it was prohibitively expensive.
This is an incredibly cynical proposal that’s obviously designed to undermine the insurance market, so I guess they could all laugh that sick people no longer have insurance. That’s where we are.
SHARMINI PERIES: How popular is this, first, on the Hill and, second, among the public?
DEAN BAKER: On the Hill, the Republicans support it, obviously. I don’t know if they all will. Obviously in the Senate they don’t have a lot of room to spare. They have 52 Republican senators and they need to get at least 50 votes in order to get it through, of course, with Pence voting as vice president. Whether they’re able to hang on, they fell short with the previous efforts at the repeal the Affordable Care Act, whether they’ll be able to get 50 this time remains to be seen.
In terms of public as a whole, obviously most people aren’t studying the issues, they don’t understand what’s at stake. If you go, “Oh, what do you think? The government’s requiring you to get insurance, how about we get rid of that?”, my guess is that would probably get thumbs up. If you say, “What do you think of getting rid of insurance markets so that you aren’t able to get insurance if you have a health condition?”, we know the public overwhelmingly is opposed to that story.
It’s a very cynical move. They might be fine with it when it initially passes. When we get to, say, next fall and we have the insurance rates come out and people are looking at massive increases or maybe no insurers at all, I guess the public will be less supportive.
SHARMINI PERIES: Dean, turning to other changes the Republicans have announced, what do you make of the proposal to phase out individual income tax reductions, but to make corporate tax reductions permanent?
DEAN BAKER: Again, this is more of the cynicism. They’ve decided that they could raise the debt by $1.5 trillion over the decade. It’s an arbitrary number. Personally, I don’t care particularly, except what they’re raising it for. In other words, I’m not worried about adding more $1.5, $1.6, $1.7 trillion to the debt. I don’t think we have a big problem with that right now. The point here is that in order to meet their target, they’re telling people that, “Oh, we have to phase these out, but don’t really worry, because once we get to,” if we’re looking eight years out, I assume it would be 2025, I don’t know exact [inaudible 00:04:53] schedule, 2025, “Don’t worry, we won’t actually phase them out, we’ll keep them in there because no one is going to want to raise taxes on individuals.”
That’s very cynical. If you want the tax cuts to be permanent, why don’t you make them permanent tax cuts, and if you think that we can’t afford to make them permanent, that’s an arguable position, but whatever, then have smaller tax cuts. Again, this is just the same sort of cynicism as with the repeal of the mandate. It’s not policy that they’re prepared to stand behind, they’re just playing games.
SHARMINI PERIES: What are some of the other major changes in the Republican proposal that was announced recently, and what are your thoughts on these?
DEAN BAKER: One of the things that they got rid of was actually something in the House bill. It kept the mortgage interest deductions, so you wouldn’t be able to deduct interest on more than $500,000 in mortgage principle. I thought that was a good idea because there’s no reason for taxpayers to be subsidizing someone getting a $6-7-800,000 home. It leaves in the provision that ends the deduction for state and local income taxes. That’s a big hit to people in New York, California. That’s, to my view, pretty bad. It’s unfair and it’s obviously designed to hit blue states and discourage state governments from having, say, generous Medicaid, generous programs in other areas.
It also, some more technical provisions, there had been a provision that would have ended the tax deductibility of payments that were made to executives for their retirement. You have many high executives that might get, say, $100,000, $200,000 a year in deferred compensation. In the House bill, they would have to pay tax on that. In the Senate bill, they took that out. To my view, that was a good thing in the House bill, because I don’t see any reason, if I want to put $20,000 in a stock market, I don’t have $20,000, but if I wanted to take $20,000 from my salary and put it in the stock market, I pay the tax on it and then I put it in the stock market. I don’t see any reason at all why you should have the high executives at a major company being able to put in maybe 10 times, 20 times that amount and not have to pay tax on it.
Those are some of the changes. It’s a mixed bag whether they made it better or worse. In those two cases, I think they made it worse.
SHARMINI PERIES: Finally, earlier this week, Dean, 400 millionaires sent a public letter to Congress, urging Congress to raise their taxes, not to lower them. The letter includes well-known millionaires, such as Ben & Jerry’s company founders Ben Cohen and Jerry Greenfield, billionaire George Soros, philanthropist Steven Rockefeller and fashion designer Eileen Fisher, I understand. Are we seeing a division within the ranks of the wealthy on this particular issue?
DEAN BAKER: We are to some extent and it’s a little encouraging. These people have made out like bandits over the last four decades. Some of the people who signed that letter are prepared to say that, they don’t need more money. On the other hand, you have the Kochs, the Mercers, any number of other billionaires who, however much they have, however much they can get, they always want more. It is nice to see that you have some of these very wealthy people who are prepared to say, “Hey, we’re doing okay. Why don’t you tend to some other needs? You don’t have to give us more money.” I was encouraged to see that. How much impact it has, we’ll see, but it’s at least nice to see that some of these very wealthy people are prepared to, to my view, sacrifice their self-interest for what they see as the public good.
SHARMINI PERIES: Dean, as always, good to have you on, and looking forward to your report next week.
DEAN BAKER: Thanks a lot for having me on.
SHARMINI PERIES: And thank you for joining us here on The Real News Network.