Two tax issues dividing Republicans on ObamaCare

Republican lawmakers are objecting to two key elements of their party’s plan to replace ObamaCare, creating obstacles in the road to repeal.

Conservatives worry a tax credit to assist people with the cost of insurance, which would help people maintain or get coverage, will be too costly and that recipients might abuse the government help.

“I want to make sure that we’re not getting to a place where we’re providing this open-ended benefit that enables people,” said Rep. Mark Walker (R-N.C.), chairman of the conservative Republican Study Committee.

Objections also are being raised against a proposal to open up some employer-sponsored health insurance plans to taxation. Some Republicans worry that proposal is essentially a new version of ObamaCare’s much-reviled “Cadillac tax.”

House committees hope to start considering repeal and replace legislation in early March, but the objections highlight that as specifics come out, opposition can intensify.

{mosads}Leaders of the RSC and Freedom Caucus, another conservative group, have both raised alarms.

Walker and other lawmakers say they prefer a tax deduction for health insurance to the refundable tax credit.

“I think that hard-line conservatives will come out, I would say, near unanimously against the idea of a refundable tax credit,” said Rep. Mark Sanford (R-S.C.), a member of the Freedom Caucus.

A tax deduction, however, wouldn’t provide help to people with low incomes who need insurance. The refundable tax credit would. 

Unions railed against ObamaCare’s Cadillac tax, which imposed a tax on generous health insurance plans.

The idea has come back as lawmakers discuss setting a limit on the non-tax treatment of employer-sponsored health insurance. Taxing some of these plans would provide revenue to pay for the tax credit.

Rep. Pete Sessions (R-Texas), the chairman of the House Rules Committee, told reporters he has concerns the idea is “a Republican tax on Cadillac plans.”

Rep. Tom Cole (R-Okla.) likewise said he is “not comfortable with that at this point” when asked about the proposal.

“There are going to be a lot of conservatives who scream foul and say, ‘Wait a minute, this is a tax increase,’” Sanford said. “‘We criticized President Obama about tax increases; this is a tax increase.’”

House Ways and Means Committee Chairman Kevin Brady (R-Texas), who is playing a key role in crafting the replacement plan, defended both the tax credit and capping the tax exclusion when asked by reporters about the criticisms last week.

He said the tax credit would cover more people and provide help immediately.

“It covers more people, because it applies to those who don’t have a tax liability, and it’s advanceable, so it’s available today,” he said. “A deduction is available a year or 16 months later whenever you do your taxes, so the thinking is to have that help immediately.”

Asked about criticism that capping the tax exclusion is a tax increase, Brady said: “I don’t see it that way.”

He added that no final decisions have been made on the issue.

Some Republicans have called for simply keeping ObamaCare’s range of tax increases in place to provide revenue, but Brady pushed back on that idea.

“I’ll just tell you, I don’t want Americans to suffer under the ObamaCare taxes. They’re anti-growth, they drive the prices of healthcare up; I just think they’re bad all around,” Brady said.

“I’m not interested in raising taxes anywhere else, and so I think unlocking and redesigning the current tax break so not just a few Americans can use it, but all Americans can use it, I think that’s where we ought to focus our thought, make sure we design it right and get it right.”

Another fight concerns ObamaCare’s expansion of Medicaid. Thirty-one states accepted federal funding to expand Medicaid under the law. Now some lawmakers from those states are wary of losing the extra federal funds and having their constituents lose coverage.

Sen. Steve Daines (R-Mont.), whose state accepted the expansion, told The Hill Friday that he is calling for a four-year transition period until the higher federal Medicaid dollars go away.

However, Ohio Gov. John Kasich (R) on Sunday called the House Republican plan to phase out the extra federal funding for the Medicaid expansion a “very, very bad idea, because we cannot turn our back on the most vulnerable.”

Kevin Smith, a spokesman for Sen. Rob Portman (R-Ohio), wrote in an email Tuesday that Portman wants people enrolled in Medicaid expansion to be able to keep coverage in some form.

“For any replacement solution, Rob has made clear that we should work to ensure that the millions of Americans who signed up for expanded Medicaid can continue to receive health coverage, and he is working with Governor Kasich on this effort,” Smith wrote.