Revenue hole may bring GOP back to ACA repeal

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(Bloomberg) — The impact of House Ways and Means Chairman Kevin Brady’s amendment to revise one of the GOP tax bill’s offshore provisions emerged late Tuesday -- an estimated $74 billion revenue hole, which is sending tax writers scrambling to find additional revenue.

They may pursue a risky strategy to make up the shortfall: repealing the 2010 Affordable Care Act’s individual mandate. House Republicans are edging closer to accepting President Donald Trump’s suggestion to combine their tax legislation with a repeal of the mandate that all individuals purchase health insurance, according to a person who’s helping to draft the tax bill.

While the move would give House tax writers an estimated $416 billion in sorely needed offsets for the deep rate cuts they want, it risks alienating GOP senators, who voted down a measure that would have repealed the so-called individual mandate last summer.

Consideration of the individual-mandate repeal began to gain traction late Tuesday as Republican members of the House Ways and Means Committee came under pressure from GOP colleagues to preserve popular tax credits and deductions, said the person, who asked not to be named because of the sensitivity of the matter.

It may gain even more traction after a report showed that changing one of the international provisions -- effectively gutting a controversial proposal to tax U.S. companies’ payments to related foreign affiliates -- along with some other last-minute changes from Monday evening would increase the 10-year deficit that the tax bill would produce by $160.7 billion, to $1.57 trillion, according to the Joint Committee on Taxation. The tax legislation must stay under the $1.5 trillion limit set in Congress’s 2018 budget resolution to avoid the threat of a Democratic filibuster in the Senate that could kill it.

Still, House Freedom Caucus Chairman Mark Meadows doubted that the repeal of the Obamacare mandate would be included in the House bill.

“There is a concern about having the health-care debate and tax reform happen simultaneously,” Meadows said earlier Tuesday. “House leadership hasn’t specifically said that but the indication, if I’m reading between the lines, is there’s no way it gets in the House version.”

Whatever the solution to bridge the gap is, it will likely be made behind closed doors. Despite the public debate this week, many of the most difficult decisions are being negotiated in secret between party leaders and individual members.

In addition to changes to international tax provisions, some GOP members want to restore the adoption tax credit, while others wanted to raise the mortgage interest deduction cap for new homes to $750,000 from $500,000. Yet others want to simplify rules that restrict which partnerships and other pass-through businesses can qualify for a tax rate of 25 percent.

The third day of the markup will likely include more back-room negotiations, as well as additional votes on amendments proposed by Democrats as lawmakers continue working their way through the 425-page tax bill.

It remains unclear what changes, if any, will be made to the bill by its expected approval by committee on Thursday. But Brady has said that once it reaches the full House for a vote, the legislation won’t be open to amendment. That means there are just two more days left to revise it. And two more days until the Senate plans to release their version of a tax bill, which could be significantly different from the House version.

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