The GOP crack-up over repealing ObamaCare is deepening by the day. As Republicans finally begin sweating the details of a replacement plan, old philosophical fissures over how government should help low-income Americans are reappearing.
Republican leaders, of course, are dead set on repealing ObamaCare, but feel political pressure to avoid throwing people off of their insurance. That will require continuing to subsidize people who cannot afford insurance on their own. To that end, Speaker of the House Paul Ryan recently released an outline of a plan that would provide refundable tax credits to help people afford coverage.
This is actually very similar to how ObamaCare works. A key part of the Affordable Care Act is that it provides tax credit subsidies, called "advance refundable tax credits," to help individuals afford health insurance. These subsidies can be substantial depending on your income — for some people, the subsidies cover the entire cost of their health insurance premiums. The biggest difference between ObamaCare and Ryan's subsidies is who will receive the bulk of the credits — ObamaCare's give more to the poor; Ryan's to the elderly, irrespective of income — but the mechanism is largely the same.
Unsurprisingly, hard-line conservatives in Congress have rebelled against Ryan's plan. The conservatives see refundable tax credits as thinly veiled welfare — a government handout that's anathema to conservative principles of limited spending. Rep. Trent Franks (R-Ariz.) worried that a refundable tax credit for health care "can so easily become a major and unstoppable entitlement." Rep. Mark Walker (R-N.C.) fretted that the tax credit could morph into an "open-ended benefit that enables people."
Instead, these conservatives prefer a tax deduction for health insurance costs that would provide little help to those who need it most. Because a tax deduction only reduces your tax liability, it provides the most help to people who pay a lot in taxes (i.e. the rich) and the least help to those who pay relatively little (i.e. the poor).
There is a long history of conservative queasiness with tax programs that provide a net benefit to low-earners. Refundable tax credits first came into vogue as a compromise between the two parties. Democrats that wanted direct government spending programs settled for a submerged state of social spending through the tax code. Meanwhile, Republicans were able to defuse the growth of the welfare state while winning bipartisan cooperation on tax cuts. This produced programs like the Earned Income Tax Credit and the Child Tax Credit, which can pay out refunds greater than what someone pays in federal income taxes.
But as conservatives grew less and less interested in pragmatic compromise, their discomfort with refundable tax credits steadily heightened. In 2008, then-candidate Barack Obama proposed to expand refundable tax credits meant to promote work and help families pay for child care. GOP nominee John McCain blasted this proposal as a redistributive "government giveaway" that would "raise taxes on some in order to give checks to others."
This foreshadowed the 2012 campaign, where Mitt Romney bemoaned the 47 percent of Americans paying no income tax. Meanwhile, Romney's running mate, Paul Ryan, was pitting the country into "makers" against "takers," with millions of supposed freeloaders mooching off of the productive class. This cemented the conservative turn against tax code benefits for the poor, including their own earned-income credit.
After Romney's loss, Republicans tried to shed their image as uncaring social Darwinists. But this shift barely went beyond messaging. The tax reform plans congressional Republicans churned out still refused to provide help to Americans too poor to have any tax liability. For instance, Sen. Mike Lee (R-Utah) proposed an amped-up Child Tax Credit that would have only given poor families a refund equal to what they paid in payroll taxes. Any more, Lee believed, would amount to welfare.
Though it went largely unnoticed, this debate sprang up again in the 2016 Republican presidential primary. During a November 2015 debate, Sen. Rand Paul (R-Ky.) accused Sen. Marco Rubio (R-Fla.) of engineering a trillion-dollar "government transfer payment" by proposing an expanded partially refundable Child Tax Credit. Paul questioned whether such a "new welfare program" was truly conservative.
So conservatives have been skeptical of refundable tax credits as liberalism-lite for some time. Paul Ryan has attempted to goad support from conservatives by drawing a meaningless distinction between the refundable tax credits in his health plan and ObamaCare's subsidies — even though those subsidies are explicitly fashioned as refundable credits, too.
Conservatives haven't been fooled. Rep. Mark Sanford (R-S.C.) expects that "hard-line conservatives will come out ... near unanimously against the idea of a refundable tax credit." That alone could imperil GOP repeal plans.
This means that Republican leaders may not have the votes in their caucus to do anything to help low-income and working-class Americans obtain health coverage. Indeed, the knee-jerk jettisoning of any policy that resembles a feature of ObamaCare will make it awfully tough for Republicans to design a serious, well-functioning health care system at all.
Both of which make it all the more difficult for Republicans to coalesce around an effective alternative to ObamaCare. In truth, most conservatives would simply prefer to return to the pre-ObamaCare status quo. Nonetheless, their leaders see the political need to produce a plan that at least approximates ObamaCare's coverage goals. But that requires the kind of social spending that conservatives fundamentally abhor even when it's dressed up as a tax break.
It's unclear how the GOP will disentangle that knot. But it's a knot that the party should have seen coming.