Health care bill talks include leaving Obamacare taxes intact, key senator says

As Senate Republicans scramble to get the 50 votes they need to pass a sweeping health insurance overhaul, they are looking at taking away one of the Democrats' strongest talking points: that the bill strips away insurance for the poor to fund tax cuts for the rich.

Sen. Ron Johnson, R-Wis., told constituents Wednesday that he could support leaving in place some of the taxes created to fund the Affordable Care Act, or Obamacare. Johnson's comments came after one caller to his Wisconsin telephone “town hall” complained the bill was a “massive tax cut for the affluent.”

“We are discussing that,” Johnson said. He said the most likely tax to be left in place is the 3.8% surtax on investment income such as dividends, interest and capital gains that exceed $200,000 for individuals and $250,000 for couples. 

He also cited a 0.9% payroll tax on income over $200,000 for individuals and $250,000 for couples that goes into the Medicare trust fund.

According to the Joint Committee on Taxation, the bill's proposal to repeal the net investment tax starting next year would cost $172.2 billion through 2026, while ending the Medicare tax starting in 2023 would cost $58.5 billion.

Overall, the bill proposed last week by Senate leaders, like one that passed the House in May, would eliminate about $600 billion in taxes that pay for states to expand Medicaid eligibility and for subsidies for people who don't get it from their employers to buy private insurance through Obamacare.

Some GOP moderates want to revisit the bill's tax cuts, but Johnson’s support would be significant because he is one of the Senate’s most conservative members. Johnson said last week he opposed the Senate bill as written and helped block a vote that Majority Leader Mitch McConnell, R-Ky., had hoped to hold this week.

Tennessee Republican Bob Corker also suggested Thursday that his party may jettison the investment tax cut, saying it would leave more money to fund health insurance subsidies for lower-income Americans.

McConnell said Wednesday that senators will continue to negotiate and attempt to bring the bill back up after next week's July Fourth recess.

Grover Norquist, president of Americans for Tax Reform, said it’s a positive sign that senators like Johnson say they’re open to negotiations to “get to yes,” but keeping the investment tax in place is the wrong way to get there.

“If you want to get more people health insurance, you don’t increase the one tax that’s most damaging to economic growth, the capital gains tax,” Norquist said. “It’s not going to help us either pass health care reform or get the benefit of health reform, which is more people with jobs that have health care attached to them.”

The tax cuts for upper-income earners have drawn particular fire because they are coupled with rollbacks to Medicaid that would affect many low-income Americans.

Within hours of the release of Senate Republicans' bill last week, Democrats took aim at the tax cuts.

“The bill takes dollars out of healthcare for millions of Americans and puts them right back in the pocket of the wealthy,” New York Sen. Chuck Schumer, the Democratic leader, said on the Senate floor last week.

Johnson told constituents that, “I’m personally not opposed” to scrapping some tax cuts to pay for the expenditures in the bill. He cited his concerns about the debt and deficits. Leaving some taxes in place would provide money for more generous health benefits than the bill originally proposed.

Johnson said during the telephone town hall that he told his GOP colleagues Wednesday that if the Republicans are going to keep billions in Obamacare subsidies that help people pay for insurance. “We ought to fund it.”

Johnson said he has his own priorities as to which Obamacare taxes should not be repealed.

“This is going to be a conference decision but I think (for) a lot of us taking a look at that, the one most likely not to be repealed would be the net investment tax, then the Medicare tax increase,” he said.

Johnson said the taxes that he expects would still be repealed would be ones that “actually affect the price of premiums, the price of health care.”

Those presumably would include a tax on health insurance providers, which would generate $145 billion through 2026, according to the Joint Committee on Taxation; an excise tax on medical device manufacturers that would generate $20 billion; and a tax on highly compensated executives at health insurance companies that would generate $505 million.

Citing his concern about debt and deficits, Johnson said, “I am personally not opposed to retaining the taxes to pay for the expense.”

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