Republicans still oppose "Obamacare" but may be reluctant to disrupt the healthcare system by letting the more generous tax credit subsidies expire at the end of the year. Yet even as the GOP-led Congress propels forward with a sweeping tax-and-spending-cuts package, leaders have been silent about the fate of the enhanced subsidies.
The fiscal 2025 budget resolution Congress approved last week, which serves as the blueprint for extending the Tax Cuts and Jobs Act of 2017 and slashing federal expenditures, may have inadvertently created an opportunity for advocates of extending the exchange tax credits.
'Magic math'
Typically, lawmakers submit proposals to the Congressional Budget Office and the Joint Committee on Taxation, a pair of nonpartisan congressional agencies that estimate the fiscal effects of legislation. These analysts normally treat current law as the benchmark against which changes are measured.
In this case, the so-called current law baseline is that Trump's tax cuts and Biden's enhanced exchange tax credits sunset on Dec. 31. As such, extending the tax cuts would decrease federal revenue and extending the subsidies would increase spending, both of which would elevate the deficit if not offset by tax increases or spending cuts in other areas.
The actual value of the tax cuts is $4.5 trillion over 10 years, which includes extending tax cuts from the 2017 law, reviving some policies from that statute that already expired and creating new tax cuts, according to the CBO.
Senate GOP leaders decided to jettison the standard process through what critics disparage as an accounting trick.
Rather than use the current law baseline, Senate Republicans employed what they're calling the "current policy baseline." Current policy is that the 2017 tax cuts are the law. Using this rationale, Republican leaders assert that because the tax cuts exist in the present, their effects on the federal budget should be assumed in perpetuity. Hence, a $4.5 trillion tax cut package that doesn't cost $4.5 trillion.
The esoteric budgetary controversy has real policy and political implications.
When Senate Majority Leader John Thune (R-S.D.) revealed this plan, Warren derided it as "magic math." But she also asked the Joint Committee on Taxation to weigh in on how the "current policy baseline" would apply to the exchange tax credits.
Even if the budgeting concepts are a little arcane, the logic turned out to be simple: Extending the enhanced subsidies this way would cost nothing, not the $335 billion the CBO estimated last year, the Joint Committee on Taxation concluded.
"If a member of Congress were to ask for the budgetary effect of extending the enhanced premium tax credit relative to a baseline defined to assume that the enhanced premium tax credit was a permanent component of the Internal Revenue Code, legislation extending the enhanced premium tax credit would have no reportable budgetary effect," the Joint Committee on Taxation wrote Warren last month.
"They want to use magic math in one space — for tax giveaways to billionaires — then magic math applies everywhere," Warren said. Even in the service of advancing a Democratic priority, however, the tactic makes Warren uncomfortable, she said. "Those are real dollars. There's no magic way out of that," she said.
Wise or not, if Republicans use one set of rules for tax cuts, they same rules should hold for other matters, said former Rep. Dr. Larry Bucshon (R-Ind.), a senior policy adviser at the law and lobbying firm Holland & Knight.
"If you want to have any credibility that you used it for the tax legislation, then it has to be applicable to the extended tax credits," said Bucshon, who retired from the House in January after seven terms.
Darbin Wofford, the deputy director of healthcare policy at the centrist think tank Third Way, agreed while remarking that using the "current policy baseline" is a bad idea.
"This could apply to any active policy that is temporary. While this might theoretically help with the politics of the ACA premium extensions, it’s a terrible budget gimmick that would explode the debt," Wofford said.
Republican reaction
Every Republican senator voted for the budget resolution except Sens. Susan Collins (Maine) and Dr. Rand Paul (Ky.). Paul, like the two House Republicans who opposed the budget, objected to the "current policy baseline" approach.
Yet Senate Republicans are not eager to discuss whether the ACA deserves the same treatment as the Tax Cuts and Jobs Act.
"I don't know. That sounds like a Lindsey Graham question to me," said Sen. Josh Hawley (R-Mo.), referring to the South Carolina Republican who chairs the Senate Budget Committee.
"I haven't looked at that," said Senate Majority Whip Dr. John Barrasso (R-Wyo.).
"I don't have all that information," said Sen. Jim Justice (R-W.Va.).
Sen. Thom Tillis (N.C.) is one of the Republicans facing tough reelection bids next year who are open to extending the exchange tax credits. But not this way, he said.
The tax and spending measure under development is a partisan exercise with no Democratic support, and the marketplace subsidies should be handled alongside the minority party, Tillis said. "It needs to be a balanced, bipartisan bill that we can get the president to agree to," he said. "Those expire this year and if we have members who want to avoid that expiration, we need to get the table and prove we can work a bipartisan bill."
Doing nothing and allowing the enhanced subsidies to lapse would cause coverage losses across the country, including in regions Republicans represent on Capitol Hill. "There will be people who won't be able to afford their exchange plan," Bucshon said. "That's why the politics of that is all so difficult."
Another benefit to using the "current policy baseline" for the ACA tax credits is that, if Democrats agree to smaller subsidies, that would constitute spending reduction on the ledger. Even if Democrats can't convince the GOP to wholly extend the tax credits, they might get other concessions.
"I think there'll be a deal there," Bucshon said. "It generates savings that Congress will want to use for something else."
