How the US Is Losing Billions in Unpaid Taxes

Plus, Why the GOP won't be 'the party of health care'

Why Republicans Won’t Soon Be ‘the Party of Health Care’

President Trump this week boldly proclaimed that “the Republican Party will soon be known as the party of health care.” The president reportedly told lawmakers that he had come up with the new branding on his way from the White House to the Capitol.

Turning that slogan into reality before the 2020 election will be close to impossible. Developments this week show why—and highlight how the administration, for now at least, is sowing disarray across broad swaths of the health care system.

Eliminate Obamacare – Then What?

Republican lawmakers were left scrambling when the Trump administration this week threw its support behind a legal ruling to invalidate the entire Obama health law. "If the Supreme Court rules that Obamacare is out, we will have a plan that's far better than Obamacare," Trump told reporters Wednesday. On Thursday, he said that he has asked a small group of Republican senators, including John Barrasso of Wyoming, Bill Cassidy of Louisiana and Rick Scott of Florida to craft a plan. “They are going to work together, come up with something that’s really spectacular,” Trump told reporters.

But while the White House was looking to Congress for a plan, some Republicans were looking to the White House. “I look forward to seeing what the president is proposing and what he can work out with the speaker,” Senate Majority Leader Mitch McConnell told Politico on Thursday, adding, “I am focusing on stopping the ‘Democrats’ Medicare for none’ scheme.” Other GOP lawmakers are unlikely to pull together behind a new proposal without knowing that Trump supports it, a situation that has stalled progress in the past.

Republicans, as they did in 2017, could develop a plan that relies on block grants to the states. But, as the Associated Press notes, “when the nonpartisan Congressional Budget Office analyzed similar proposals a couple of years ago, it estimated such changes would result in deep coverage losses, not to mention weaker insurance protections for people with pre-existing medical conditions.” Republicans, the AP adds, were divided in 2017 about how to develop a fair formula for providing federal money to each state.

The party is in a similar bind over protections for patients with pre-existing medical conditions. While Trump and other Republicans have promised to maintain those protections, their legislative attempts to do so have fallen short of preserving current safeguards or could allow insurers to raise costs for patients based on their health status.

Marc Short, a top aide to Vice President Mike Pence, said Wednesday that Trump will submit a plan to Congress “this year.” Whoever is drafting the new effort, the GOP’s 2017 efforts to repeal and replace Obamacare showed it won’t be easy to come up with a proposal that can find consensus among Republicans, let alone one that can garner 60 votes in the Senate and pass the Democratic-led House — or gain widespread support among the American public. “The problem for GOP lawmakers is the paucity of free-market policy ideas for health care that are politically popular,” Bloomberg’s Sahil Kapur writes.

Courts Strike a Blow to Trump’s Health Agenda

In the meantime, a federal judge on Thursday struck down the Trump administration’s rule letting small businesses and sole proprietorships join together to buy so-called “association health plans,” writing that those plans were “clearly an end-run” around the Affordable Care Act’s benefit requirements means to protect consumers. That decision followed rulings this week by another federal judge invalidating the Trump administration’s approval of work requirements for Medicaid recipients in Arkansas and Kentucky, saying that the government must consider the effects of the requirements on low-income people who stand to lose coverage.

Those rulings may not deter the administration from continuing to pursue its policies, but they sure won’t help Trump’s nascent rebranding campaign. Neither will headlines about thousands of people losing their health coverage, or the administration’s efforts to undermine the Affordable Care Act, which has risen in popularity since before Trump was elected.

A New Path?

Washington Post columnist Henry Olsen suggests that, to truly be seen as the party of health care, Republicans will have to try a new approach: prioritizing patient care above controlling costs.

“Over time, growing health costs and an aging population are projected to drive up government expenditures dramatically. Paying for those added costs would require significant tax hikes, bringing U.S. tax levels much closer to those found in Canada or Britain. Preventing that rise is surely a good thing, but Americans have yet to be persuaded to care more about this than they do about the security of Medicare. … [D]esigning a plan so that the risk of failure falls on the federal budget rather than the patient is the right way to go.”

There is, however, no sign that Republicans are currently interested in making such a fundamental shift, and it’s likely that Olsen’s advice will fall on deaf ears, leaving Republicans right back where they started on health care.

The bottom line: President Trump has made a promise Republicans will have a hard time keeping. He’s done so before — does anyone remember his sudden pledge just before the 2018 midterms to pass a 10 percent tax cut for the middle class? But in contrast to that earlier promise, Trump seems less likely to let go of this health care pledge, which means it could cause real trouble for him and the rest of the GOP heading into 2020.

Quote of the Week

"With the Medicare for all debate, Democrats decided to lay down on top of a grenade and pull the pin. Why anyone would ask them to move over is beyond me."

– Josh Holmes, former chief of staff to Senate Majority Leader Mitch McConnell, on the Trump administration’s decision to reignite the fight over Obamacare, as quoted by Bloomberg

How the US Is Losing Billions in Unpaid Taxes

With the federal budget deficit expected to rise to nearly $900 billion this year before crossing the $1 trillion mark in 2022, lawmakers and policy wonks have been looking for ways to generate more revenues, cut spending or both.

On the left, for example, Sen. Elizabeth Warren (D-MA) has proposed a wealth tax and Rep. Alexandria Ocasio-Cortez (D-NY) has called for a significantly higher top income tax rate. On the right, the Trump administration has submitted a budget request that slashes domestic spending for years to come, while Sen. Mike Enzi (R-WY) has offered a more realistic budget plan that still drastically reduces spending to lower deficits over a five-year period.

But what if a partial solution to our near-term budget woes is already in place, and just needs a kickstart? That’s the gist of a New York Times editorial published Thursday, which asks a simple question: Why doesn’t the government do a better job of collecting the taxes that Americans already owe?

The size of the problem is clearly quite large, but no one can be sure because the IRS hasn’t produced an analysis of the “tax gap” — the difference between what the country owes in taxes and what it actually pays — in years. In 2010, the tax agency estimated that Americans were skipping out on roughly $400 billion in taxes per year, which is more than half of the $779 billion deficit recorded in 2018. There’s good reason to believe that the tax gap has grown since 2010, since the economy is now larger and IRS enforcement has been declining, even as the number of high-net-worth households has increased.

Critics charge that the weakening of the IRS is very much by design, with Republicans cutting the agency’s budget repeatedly over the last decade. Between 2010 and 2017, the IRS conducted 42 percent fewer audits, according to a ProPublica report cited by the Times. And the number of enforcement agents has fallen to a low not seen since the 1950s.

As CNBC’s James Thorne put it, “The IRS is leaner, but not meaner.” And the result is that hundreds of billions of dollars go uncollected every year.

Treasury Secretary Steven Mnuchin seems to have recognized the problem, and the Trump administration’s 2020 budget includes a 5 percent boost in IRS funding. According to the IRS, the payoff from additional spending on tax collection is significant: For every $1 spent on enforcement, the agency brings in $4. However, there’s no sign that lawmakers in a divided Congress are interested in cracking down on tax cheats by providing the IRS with a big increase in funding.

“Lawmakers face many difficult issues and thorny choices. But this is not one of them,” the Times editorial says. “People should pay what they owe in taxes, and the government should spend what is necessary to make sure that they do. That is simply good government.”

Billions in Federal Disaster Relief Money Remains Unspent

Congress has appropriated $35 billion in federal funds to provide aid to victims of three big hurricanes in 2017, but little of that money has been spent, according to a report by the General Accountability Office released earlier this week.

Hurricanes Harvey, Irma and Maria caused an estimated $265 billion in damage, concentrated in Florida, Puerto Rico, Texas and the U.S. Virgin Islands. As of February 2019, lawmakers had provided more than $35 billion in Community Development Block Grant Disaster Recovery funds to the Department of Housing and Urban Development, to be used for housing, infrastructure and economic revitalization. But very little of that money has made its way to storm victims.

Here’s how the four largest recipients of aid have used it as of January:

  • Texas had drawn down about $18 million out of $5 billion allocated, for administration and planning uses only.

     
  • Florida had drawn down about $1 million out of $616 million, for administration, planning and housing activities.

     
  • Puerto Rico had not drawn down any of the $1.5 billion it has been allocated.

     
  • The U.S. Virgin Islands had not drawn down any of its $243 million.

The problem lies with HUD, the GAO said, citing numerous shortcomings at the agency and its processes that prevent it from acting quickly and competently. GAO recommended that Congress create more rigorous, permanent rules and procedures at HUD to streamline the dispersal of disaster relief funds in the future.

Your Prize for Making It Through the Week

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