Sen. Tom Cotton was about to enter the White House early this month to discuss immigration policy when he got an unexpected call from President Donald Trump to talk about a different topic.
For days, the Arkansas senator had been working behind the scenes to persuade Republicans that reigniting a battle over repealing Obamacare in the tax fight wasn’t as crazy as it seemed. But Trump, still smarting from GOP’s failures to dismantle the law whom Cotton had first pitched on the idea four days prior, needed little persuading.
“I am with you 1,000 percent on this,” Trump told Cotton over the phone. Trump tweeted twice that Republicans should repeal the mandate, putting pressure on the GOP to tuck it into tax reform despite widespread dismissiveness the idea was greeted by at the time.
That Nov. 2 conversation illustrated how the GOP rank-and-file methodically coaxed their leadership to embark on what seemed — and could still become — a fool’s errand to try again to take down Obamacare. In a surprise move, Senate Republicans said Tuesday that they would repeal Obamacare’s individual mandate in their tax plan, using the savings to plow into more tax cuts.
“Hesitant would be kind,” Cotton said of leadership’s initial reaction to his pitch. It was “skeptical to outright opposed … many people were burned by our experience on health care not once, but twice in July but again with Graham-Cassidy in September,” referring to another failed attempt to repeal Obamacare earlier this fall.
At the very least, the strategy throws the political grenade of health care into the already-complicated task of overhauling the tax code. At least one influential swing vote on tax reform, Sen. Susan Collins of Maine, has expressed concerns about adding Obamacare into the tax mix. Democrats vowing to kill the GOP’s tax efforts are convinced that Republicans have only given them more ammunition.
And the GOP will have to reckon with the consequences of striking the individual mandate, which the Congressional Budget Office says would cause health care premiums to spike and lead to 13 million fewer people who have insurance.
But Republicans argue it this way: It actually smooths passage for tax reform by giving them a pot of cash to play with for popular tax breaks. One GOP senator said Republicans might have had to set the corporate rate at higher than 20 percent if not for the savings from the mandate. The move also allows them to avoid killing popular tax breaks — such as the adoption tax credit — like the House initially had to do.
“Some of the skeptics finally decided that … we were going to have to put some pretty unpalatable things in the bill and $338 billion alleviates some of the ugliness,” said the Republican senator.
Senate Finance Committee members had frequently brought up the idea of repealing the mandate in their regular meetings ahead of the release of the original bill. But the public push to repeal the mandate — from Republican senators including Cotton, Pat Toomey of Pennsylvania, Ron Johnson of Wisconsin and Rand Paul of Kentucky — helped drive momentum to repeal the mandate, according to GOP aides.
In an interview with POLITICO, Cotton said he became convinced that the GOP had to target the individual mandate during an Oct. 26 meeting with Senate Finance Committee members. Republican senators detailed what Cotton described as a “parade of horribles” — a series of popular tax breaks they would need to rescind — that would result absent the hundreds of billions in savings from nixing the health care requirement.
“I started seeing the looks of hesitancy and outright terror on the faces of my colleagues,” Cotton recalled. “[I] spoke to some of them over the next few days and just realized that if we wanted the tax bill to work within the constraints of the budget, we had to repeal the mandate.”
Cotton had already mentioned his idea offhand to Senate Majority Leader Mitch McConnell on the Senate floor. But then the senator quickly got to work on crafting a way to inject Obamacare repeal into the tax fight, as unlikely as it seemed.
Cotton spoke privately with White House officials including legislative director Marc Short and Jonny Hiler—a former Cotton aide who leads Vice President Mike Pence’s legislative operation—as well as from the conservative radio host Hugh Hewitt.
Even as the rank-and-file began to coalesce around the idea, there were other areas to smooth out before leadership could decide to include it into their tax plan.
Cotton, Toomey, Sens. John Thune of South Dakota and Mike Crapo of Idaho met privately with CBO director Keith Hall to make sure that repealing the mandate would yield at least $300 billion in savings. (It was ultimately $338 billion.)
“Ten days ago, I think people were a little surprised at the impact of what it would have in terms of the fiscal side,” said Sen. Mike Rounds (R-S.D.). “$338 billion to begin with is a lot of dollars and it really does make tax reform a lot easier to put together.”
Now, GOP leaders say publicly that they have the votes for including the mandate repeal, even if it causes complications with the likes of Collins. The cash went to new provisions such as boosting the size of the child tax credit, as Sens. Marco Rubio (R-Fla.) and Mike Lee (R-Utah) wanted.
Republicans are also framing the mandate repeal as a tax cut, say GOP aides. According to IRS figures, nearly 80 percent of Americans who paid the penalty in 2015 made under $50,000.
“What members saw is an opportunity to help middle class families,” a Senate Finance aide said. “Here is a pot of money sitting here and negatively impacting people trying to help.”
Still, the GOP plan would allow key tax cuts for individuals to expire, while business cuts would be permanent. That opens the party to criticism from Democrats for tilting their plan toward corporations while going after the health care law, yet again.
“It’s not done in the abstract,” Cotton said. “Once you have to compare it to popular, widespread deductions like the mortgage interest deduction or the state and local tax deduction, then a lot of members who might be otherwise reluctant will see that’s the simplest way to deliver more tax cuts for working families.”
Senate Republicans have other concerns they need to satisfy on their path to 50 votes, however. Sens. John McCain of Arizona, Bob Corker of Tennessee and Jeff Flake of Arizona, have raised concerns about the deficit impact of the tax bill. And on Wednesday, Sen. Ron Johnson of Wisconsin became the first GOP senator to say he outright opposes the tax bill.
And even if the mandate repeal clears the Senate, it will have to contend with the House, whose plan does not include the provision. Speaker Paul Ryan (R-Wis.) is concerned that injecting controversial health care provisions to the tax package — a top priority for Republicans — will sink the entire bill. But House Republican sources say if the Senate can repeal the mandate, the House will almost certainly follow suit.
Nonetheless, no one expected even a few days ago that the party would try again on health care.
“Things,” mused Senate Majority Whip John Cornyn (R-Texas), “change quickly around here.”
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