Global Tax Insights
Republicans Pull American Health Care Act....What Happens Now?March 24, 2017
The American Health Care Act was pulled from consideration on Friday, March 24. Will House Republicans still be able to achieve their tax reform plans?
House Republican leadership pulled the American Health Care Act (AHCA) bill from consideration, which is a surprising twist since President Trump and his administration had hoped the savings generated under this health care plan would help subsidize his proposed tax overhaul. (See our blog, “6 Key Components of the Recently Proposed American Health Care Act (AHCA).”) Among other things, this means that the Affordable Care Act (ACA) is still the law of the land and Republicans no longer have the billions of dollars in savings from abolishing the ACA’s taxes and subsidies.
Why Didn’t the House Vote?
According to Vice President Pence, “Congress just wasn’t ready.” Republicans have voted to repeal the ACA several times since its enactment in 2010, but they couldn’t come to an agreement on an alternative to replace it.
The AHCA faced a lot of criticism, because it had the potential to affect many Americans negatively. Many critics worried that eliminating the requirement for Americans to carry health insurance could lead to higher monthly health insurance premiums.
Without repealing the ACA, some House Republicans estimate that the corporate tax rate will have to go up 10 percentage points from their original tax reform blueprint. In June, House Republicans had proposed a 20% corporate tax rate.
President Trump and congressional Republicans are still hopeful for tax reform, viewing the pull of the AHCA as an opportunity to gain a better understanding of what it will take to move a tax reform bill.
How Will Keeping the ACA Affect Businesses?
The AHCA bill was expected to save $150 billion from 2017 to 2026, according to the latest research from the Congressional Budget Office). But retaining the ACA until 2023 will raise the revenue baseline for tax reform. This, in turn, means that House Republicans will have a smaller margin for keeping their plan revenue neutral.
Tax reform is still high on Trump’s presidential agenda — and his administration is pushing full steam ahead to achieve significant tax cuts for individuals and businesses.
Additionally, Trump has made it clear that the ACA is not here to stay, despite this temporary setback. The failure of the AHCA bill has opened up opportunity for the administration to rethink their reform process in both the health care and income tax sectors.
Stay tuned for updates on health care and tax changes under the Trump administration. We’ll keep you informed. In the meantime, if you have questions, contact us.