Lawmakers will head to congressional conference in the coming days to finalize details of what could be the country’s first comprehensive tax overhaul in decades. But much of their discussions to this point – and much of the haggling that lies ahead – stretches the boundaries of what would traditionally be considered tax tweaks.
Significant reforms to health care, education funding and even environmental protections lie in the pages of two lengthy GOP-crafted tax proposals. The repeal of the individual mandate requiring most Americans to purchase health insurance or face a penalty, for example, would indeed lift a particular tax burden implemented under former President Barack Obama’s health care law. But it would also strike a key blow to the viability of Obamacare, raise premiums across the country and lead to millions of Americans lacking insurance coverage.
In addition, the tax bill would open the door to oil drilling in Alaska’s Arctic National Wildlife Refuge – a region of millions of acres of Alaska recognized by President Dwight D. Eisenhower back in 1960. A group of nearly a dozen GOP lawmakers last week wrote a letter to House Speaker Paul Ryan of Wisconsin and Senate Majority Leader Mitch McConnell of Kentucky expressing “concerns with any proposal that would implement an oil and gas leasing program in the refuge.”
But the measure is still broadly expected to be included in a final tax package, despite its apparent disconnect from the tax code.
“Opening [a portion of the refuge to drilling] and tax reform both stand on their own, but combining them into the same bill, and then successfully passing that bill, makes this a great day to be an Alaskan,” Sen. Lisa Murkowski, R-Alaska, said in a statement Saturday when the legislation cleared the Senate.
It’s by no means uncommon for lawmakers from either party to work other priorities or seemingly unrelated items into big-ticket pieces of legislation, though it’s notable in this case considering some GOP lawmakers’ focus on simplification and regular order.
Among the other loosely connected items to tax reform included in the Republican proposals is a House provision allowing churches and nonprofits to more actively engage in political activities. The House bill also includes language that recognizes unborn fetuses as possible beneficiaries under a type of college savings plan – potentially opening the door to battles over abortion down the road.
Lawmakers have also proposed expanding these tax-free 529 college savings accounts to be used on K-12 education – notably, at private or religious schools or for homeschooling. Should such a provision pass, it would represent a key win for Education Secretary Betsy Devos and her school choice agenda.
Indeed, the educational landscape in the U.S. stands to be considerably shaken up should some of the proposed provisions be signed into a final package. Both the House and Senate bills include new excise tax provisions on investment income at schools with large endowments – though what’s considered “large” currently varies between the House and Senate plans. Sen. Pat Toomey, R-Pa., narrowly failed to pass an amendment that would have exempted Hillsdale College – a conservative university in Michigan with ties to both Devos and the Koch brothers – from that excise tax.
“The middle class loses tax breaks for education and medical expenses, see their tax cuts erode over time and their health care premiums go up,” Chris Faricy, a professor of political science at Syracuse University’s Maxwell School, said in a statement Tuesday. “[I]f the provisions in the House version make it through conference then graduate students and people with student loans will see higher costs for their education.”
Indeed, several education experts have argued that the proposals – which on the House side includes language that would eliminate interest deductions for student loans and tax tuition waivers as income – would make higher education less affordable over the long haul.
“As a result, we are deeply concerned that at a time when post-secondary degrees and credentials have never been more important to individuals, the economy, and our society, the tax reform proposal approved by the Senate could make college more expensive and undermine the financial stability of higher education institutions,” Ted Mitchell, president of the American Council on Education, said in a statement Saturday. “This is simply wrong-headed.”
There are conflicting theories as to whether cramming so many provisions – some of which appear to have little to do with the tax code itself – into the final bill will actually help Republicans. On the one hand, statements from on-the-fence senators leading up to last week’s decisive vote indicated several weren’t completely happy with the full package but were pleased enough with what they saw to announce their support.
Sen. Susan Collins, R-Maine, for example, withheld her endorsement until senior Republicans agreed to insert language restoring property tax deductions and promised to keep health care and Medicare expenses under control.
“This bill is not perfect. I would prefer a larger cut,” Sen. Rand Paul, R-Ky., wrote in an op-ed for Fox News last week as he also announced his support. “I’m not getting everything I want – far from it. But I’ve been immersed in the process.”
Stuffing the bill with enough incentives that GOP lawmakers simply can’t say no is certainly one strategy Republicans could take as they head to conference. But there’s some room for things to go wrong if too many extra provisions open the door to too many differences of opinion – an idea punctuated by moderate Republicans’ skepticism over the Arctic drilling provisions.
The House Freedom Caucus, meanwhile, provided its own example of what could go wrong for the GOP on Monday night, when a group of more than a dozen Republican lawmakers withheld their vote to send tax talks to conference – a vote that was considered to be merely a formality but instead threatened to stop the overhaul process in its tracks.
That vote-stalling is believed to have been motivated more by ongoing government funding deliberations than by tax discussions. But with a busy few weeks left in the year, lawmakers could potentially complicate tax discussions as they jostle for position in unrelated legislative priorities.
In less than a month, Congress will need to sort out a government funding bill, an extension of the Child Health Insurance program and a legislative fix to a program that provided protections to some young people brought to the country illegally as children – all while they attempt to send a tax package to President Donald Trump’s desk by Christmas.
And the GOP only managed to work a bill through the Senate by a narrow 51-49 margin on its first go-around. Things could still go awry if Republican senators aren’t pleased with changes made in conference – especially considering some “yes” votes haven’t exactly been giving glowing endorsements of their bill in recent days.
Sen. Ron Johnson, R-Wis., along with Collins and Sen. Jeff Flake, R-Ariz., are among a handful of Republicans who agreed to push a tax bill through the Senate if their demands were met. GOP conferees have the unfortunate task of walking a narrow line between meeting their colleagues’ expectations and packing too many potential differences into an already massive undertaking.
“Am I going to vote for the final tax package? Well, my evaluation is, ‘Is it better than where we currently are?’ It’s not a very high bar quite honestly,” Johnson said at an entrepreneurs’ conference Tuesday. “So as much as I don’t like this tax package, as much as it’s not the way I would have done it, at least we are making American businesses more competitive, and that economic growth … will be very stimulative.”