Welcome to TrumpBeat, FiveThirtyEight’s weekly feature on the latest policy developments in Washington and beyond. Want to get TrumpBeat in your inbox each week? Sign up for our newsletter. Comments, criticism or suggestions for future columns? Email us or drop a note in the comments.
As Senate Republicans look for a way to save their struggling health care bill, some of them are floating a once-unthinkable possibility: keeping some of the taxes imposed by the Affordable Care Act. It may not happen, but that it’s even on the table helps illustrate why broader tax reform is going to be so tricky for the GOP.
Democrats paid for their big expansion of the health care system via a series of new taxes on medical devices, health insurers and, especially, wealthy people. When Republicans came to power this year, they pledged to abolish most of those taxes as part of their plan to repeal and replace Obamacare. Both the bill that was passed by the House and the one that is now being considered by the Senate would cut taxes by billions of dollars.
But getting rid of the Obamacare taxes poses two big problems for Republicans. The first is political: The cuts would go overwhelmingly to the richest Americans. The Tax Policy Center, a think tank that leans to the left but whose analyses are generally respected by both sides, estimates that nearly 45 percent of the Senate bill’s tax cuts would go to the top 1 percent of households by earnings. One tax that the GOP wants to repeal, the “net investment income tax,” is even more skewed: 90 percent of its revenue comes from the top 1 percent, and 62 percent from the top 0.1 percent. That has made it easy for Democrats (including former President Barack Obama himself) to tar the Republican plan as a tax cut for the rich.
The tax cuts also create a math problem for Republicans: The more they give up in tax revenue, the more they have to cut spending on health care programs.1 That could make it harder to appease moderate Republicans who want more money to fight the opioid epidemic, smaller cuts to Medicaid and more generous subsidies for low-income Americans to buy insurance.
Now some Republican senators are suggesting that they keep at least the investment tax, which is expected to generate $172 billion in revenue over the next 10 years, according to the Congressional Budget Office. “It’s not an acceptable proposition to have a bill that increases the burden on lower-income citizens and lessens the burden on wealthy citizens,” Republican Sen. Bob Corker of Tennessee told reporters. Two other GOP senators, Susan Collins of Maine and Mike Rounds of South Dakota, have expressed similar concerns.
Some Senate conservatives are likely to oppose any effort to keep the investment tax, and, as with everything in health care right now, it’s unclear how things will shake out in the end. But whatever happens, the debate provides a preview of the coming fight over tax reform, which Republicans have vowed to tackle once the health care process wraps up. President Trump hasn’t yet released a detailed tax plan, but the outline he has provided suggests that the plan will, like the health care tax cuts so far, disproportionately benefit the rich and lead to big reductions in government revenue (making it harder to pay for spending on infrastructure, the military and Trump’s border wall, among other priorities).
The parallels aren’t perfect. It’s unlikely that any GOP tax reform proposal will favor the rich quite to the degree that repealing the Obamacare taxes would. And a stand-alone tax bill won’t have the same one-to-one tradeoff of revenue and spending as the health care overhaul. But broad tax reform is also more complicated than simply repealing the Obamacare taxes. There are dueling interests and competing priorities, even among Republicans, that could prove difficult to resolve. If Republicans are having trouble repealing taxes that they all agree they want to get rid of, it’s a safe bet that real tax reform isn’t going to be any easier.
Health care: Rural struggles
Beyond the question of tax cuts, much of the discussion of the Senate health care bill has focused on insurance coverage, in particular the 22 million additional people that the CBO estimates would go without health insurance under the plan. What has been less talked about is the impact the bill would have on the broader health system, particularly in rural areas.
Research suggests that the Republican approaches proposed in the House and Senate would have a large and negative impact on rural hospitals. An analysis from the Chartis Center for Rural Health released this week estimates that in states that expanded Medicaid under Obamacare,2 hospitals would lose more than $470,000 a year in revenue. In states that didn’t expand, the amount would be less, around $240,000. Those losses would largely be due to cuts to Medicaid included in the proposed Senate health care the bill, cuts that would total $772 billion. The bill includes additional payments to some rural hospitals, but it’s not nearly enough to offset the expected losses in insurance coverage, Chartis estimates. Those cuts would likely cause 140-1503 more rural hospitals around the country to operate at a loss. In all, 48 percent of rural hospitals could end up in the red, compared to 41 percent today.
Financial struggles have already led to nearly 80 hospital closings since 2010, and these closings can be a major hit to rural communities. Earlier this week we profiled Greene County, Alabama, home to one of the country’s struggling rural hospitals. With about 200 employees, the county health system is essentially tied with a box manufacturer as the largest employer in the county. “You close the hospital here and now you’re talking about jobs, and you’re never gonna get an industry because there won’t be a hospital in a 30-mile radius,” hospital CEO Elmore Patterson III said, adding that the closure would also mean the area would lose professionals who are a key part of the area’s tax base. Greene County isn’t an outlier; in many rural counties, the local hospital is among the biggest employers in the area.
The strain on hospitals also puts a strain on rural communities, which are already disproportionately burdened when it comes to health care. People in rural areas tend to be older and are more likely to be veterans, two high-needs groups when it comes to health care (and also two groups that supported Trump for president). Rural areas also experience higher rates of childhood poverty and higher rates of premature death. The rushed Senate process has made it hard to see beyond the basics of the bill, but its impact would be felt throughout the health system.
Immigration: The ban is back
The Supreme Court this week reinstated a limited version of Trump’s ban on travel from six predominantly Muslims countries: Libya, Sudan, Syria, Iran, Yemen and Somalia. The revived ban took effect on Thursday, nearly six months after Trump’s initial executive order. The court ruled that travelers can be barred entry if they don’t have a “credible claim of a bona fide relationship” with a person or entity in the country, but didn’t specify what qualified as bona fide relationship or who would be affected. According to guidelines issued by the State Department before the order became effective, a bona fide relationship with parents, children and in-laws in the U.S. is enough to gain entry, but not grandparents or cousins. (Late on Thursday, the State Department revised its guidelines to include fiancés.)
But even with the guidelines, which have already drawn a legal challenge, there remains significant uncertainty about how many people will be affected by the ban. Data on travel from past years can provide some guidance. In fiscal year 2016, the State Department issued over 81,000 total visas to people traveling from the six affected countries. Of those, more than 28,000 were immigrant visas, issued to people looking to move to the U.S. permanently. Most of those people wouldn’t have been affected by the Supreme Court’s version of the ban, according to the State Department — about 80 percent of them having a family or employment connection. But more than 5,000 of them were so-called diversity visas, which are given to people from countries with historically low rates of immigration to the U.S. and are issued through a lottery program. Some of those applicants would likely now be blocked by the travel ban.
The ban will likely have a much bigger impact on non-immigrants, people looking to travel to the U.S. temporarily. In fiscal year 2016, the State Department issued more than 53,000 non-immigrant visas for travelers from the six countries. Some of them were issued to students, travelers coming in through work exchange or government officials who aren’t likely to be affected by the order. But around three-quarters of them were visas for tourism, business or medical purposes.4 Applicants for those visas would only be allowed in if they could show they are visiting a close family member or have some other bona fide relationship.
These rules are only temporary. In October, the Supreme Court will review challenges to the travel ban, which could eventually pave the way for rules that are stricter (if the court upholds Trump’s ban) or more lenient (if the justices rule large parts of the ban unconstitutional). But in the meantime, immigration lawyers are bracing legal battles over the relationship guidelines.
Environmental regulation: The feds vs. the states
The Environmental Protection Agency is the most politically polarizing agency in the U.S. government. And for its mostly conservative discontents, the EPA has become synonymous with capital-“B” Big Government. But despite that reputation, state control is at the heart of how the EPA was designed. The federal agency sets standards to meet the congressional mandates in legislation, such as the Clean Water Act, but enforcement, monitoring and other practical details are largely left up to the states.5 As of February 2016, 96 percent of the powers that could be in the hands of the states were. A report published in June by the Environmental Council of the States, a nonpartisan association of state environmental agencies, described states as “the primary implementers” of environmental statutes.
But you wouldn’t know that from the speeches of EPA Administrator Scott Pruitt, who has focused heavily on a need to return control to the states — rhetoric that popped up again this week in a proposal to rescind an Obama-era regulatory rule. Together with the Army Corps of Engineers, the EPA is proposing to repeal the “Waters of the United States,” a 2015 rule meant to broaden the scope of the Clean Water Act by stretching it beyond navigable waterways to the streams, wetlands and seasonal creeks that feed them. The rule was never implemented because of legal challenges. Now, like the Clean Power Plan before it, it likely never will be.
Rhetoric about correcting federal overreach is a major part of the justification for current EPA efforts to cut budgets and eliminate regulations. But how do we make sense of a policy argument that seems contradictory to the power structure as it exists on paper? According to Alexandra Dunn, executive director of the Environmental Council of the States, the answer is tied to a fundamental disagreement about quality control.
The federal EPA retains veto authority over most of what states do in order to make sure that enforcement is carried out the same way everywhere. And while EPA officials defer to the states in general, the agency does step in if there’s a documented history of failure to make progress. The trouble, Dunn said, is that the states and the EPA don’t interpret that language the same way. States tend to think the EPA should step in only rarely; the feds have tended to be more aggressive. Dunn compared the states to people on an exercise regimen who aren’t losing weight. With all the sweat, they might feel like they’re working hard. But their trainer (the EPA) might look at the scale and feel like they aren’t. “It’s in the eye of the beholder,” she said. But the clash strains the limits of trust and, she believes, pushes some states to reject attempts to expand the scope of what they (and the EPA) would have to enforce. That’s why — despite high favorability ratings overall and general American support for its goals — the EPA is facing a major shift in priorities and funding. Pruitt has the perspective of the guy on the treadmill, not the one with the clipboard.