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Washington, D.C.— Today, Senator Orrin Hatch (R-Utah), the Chairman of the Senate Finance Committee, opened the third day of consideration for his tax reform proposal—the Tax Cuts and Jobs Act—by outlining updates to the chairman’s mark. Those updates include effectively repealing the individual mandate tax and increasing the child tax credit, among other provisions. Hatch explained how zeroing out the harsh tax burden of the individual mandate would not only provide tax relief for low- and middle-income Americans, but also save the US government $318 billion over ten years to use for further tax cuts.

[Video via YouTube]

The individual mandate isn’t just any tax, it’s a terribly regressive tax that imposes harsh burdens on low- and middle-income taxpayers.  According to the IRS, roughly 80 percent of Americans who paid the individual mandate tax in 2015 made less than $50,000 a year. Zeroing out the mandate will raise $318 billion over 10 years, money we use in our mark to actually lower taxes for the middle class.   

Also, let’s keep in mind that the mandate has been a pretty ineffective tool.  It hasn’t prevented premiums from skyrocketing, nor has it kept insurers from leaving markets. So, in the end, keeping the individual mandate tax in place means retaining the status quo, which isn’t working all too well.  Zeroing it out means we have a chance to provide greater tax relief to middle-class families, through both reduced penalties and lower overall rates. 

The full remarks, as prepared for delivery, are below:

Today we will continue our consideration of the chairman’s mark for the Tax Cuts and Jobs Act.  Last night, as promised, we delivered to members a modification that we will incorporate into the mark this morning.  After that, we will walk through the modification, and members will get an opportunity to discuss and ask questions about the modification.  Once that process is complete, the mark, as modified, will be open for amendment. 

Before we take these next steps, I’d like to make a few initial comments. 

I want to thank my fellow committee members.  We were able to include a number of their amendments in the modification, and the mark will be better for it.  From the outset of this process, producing this legislation has been a group effort as I have been joined, and more than ably assisted, by the majority members of the committee.  I want thank them and their staffs for the hours, days, and weeks of hard work that have gone into this process.  By producing this modification, we’ve taken another big step forward for tax reform. 

So, once again, thank you all for your hard work. 

Now, let’s talk about some of the highlights in the modification.  I’ll note that, while we made some important alterations to the mark with this modification, these aren’t sea changes.  The core of the mark remains the same, meaning that complaints that yesterday’s walkthrough was a waste of time were misplaced. 

One significant modification of the initial mark, which will benefit American families, is a greater expansion of the child tax credit, bringing it to $2000 per child and raising the income caps on the credit to allow more middle-class families to claim it.

In addition, we will lower individual tax rates even further than in the original mark.

The 22.5 percent rate will drop to 22 percent.

The 25 percent bracket will drop to 24 percent.

And, the 32.5 percent bracket will drop to 32 percent.

While they may seem like small changes, these modest rate reductions – along with the additional expansion of the child tax credit – will let us channel even more tax relief to the middle class.  

The modification also streamlines pass-through provisions, ensuring more small businesses – the engines of job creation for our economy – have greater access to the benefits.  We also raise the cap on the exemption for the W-2 wage limitation up to $500,000 for married couples, $250,000 for all others.  And, the modification expands the availability of the 17.4 percent deduction to service pass-through businesses for taxpayers with taxable income up to the new exemption level for the W-2 wage limitation. 

On top of that, the modification improves the new international tax system we set out in the original mark and it ensures that the new 20 percent corporate tax rate will be permanent, even under the restrictions of the Byrd Rule.  We’ll talk more specifically about these measures as we walk through the modification. 

Finally, the modification reduces the penalty under the so-called individual mandate tax down to zero.  Yesterday, this was the source of some consternation among our Democratic colleagues, who were apparently shocked to learn that Republicans oppose the individual mandate.

I expect we’ll hear a lot about this today. We’ll hear claims that the inclusion of the individual mandate tax relief is some kind of process foul and that we’ve somehow expanded the scope of the markup by including it in the modification. 

But, as was reiterated several times yesterday, the individual mandate is a tax. 

The relevant statute is the Internal Revenue Code.

The mandate is enforced by the Internal Revenue Service. 

We’re all familiar with the old saying: If it looks like a duck, swims like a duck, and quacks like a duck, it’s probably a duck.   

I think we can all agree that the individual mandate is a tax.  After all, the Supreme Court would have nullified the mandate had they not reached that very conclusion.  So, the mandate really only exists today because it is a tax.

In other words, we haven’t expanded anything by including individual mandate relief in the modification.  And, by no objective or reasonable estimation does the inclusion of mandate relief require the inclusion of every federal health program under the committee’s jurisdiction, as some of my friends argued yesterday.  Nor does it necessitate the presence of a Congressional Budget Office representative at the table, another demand we’ve heard in the last 18 hours.

These demands are absurd.  The inclusion of a tax in a tax markup is not a sufficient justification for dramatically altering the way this committee operates. 

We will stick to the tax code for this markup. That means the Joint Committee on Taxation will assist us with scorekeeping and will be at the table.  And, it means that, if my colleagues want to raise health care matters from the Internal Revenue Code, their amendments will be germane. Any amendments that go beyond the tax code will not be germane.  

And, let me say this, if my colleagues believe we need to discuss our broader healthcare system and come up with solutions, I agree with them.  We absolutely should get to work on fixing what ails our federal health programs, but we’re not going to do so in the context of a tax markup. 

By the way, the individual mandate isn’t just any tax, it’s a terribly regressive tax that imposes harsh burdens on low- and middle-income taxpayers.  According to the IRS, roughly 80 percent of Americans who paid the individual mandate tax in 2015 made less than $50,000 a year.

Zeroing out the mandate will raise $318 billion over 10 years, money we use in our mark to actually lower taxes for the middle class.  Some colleagues have spent a great deal of time over the past couple days lamenting the possibility of tax hikes on the middle class.  Yet, today, I expect that we’ll hear these same colleagues argue that this tax – which, once again, overwhelmingly burdens low-to-middle income taxpayers – is an absolute necessity and, without it, our health care system will descend into oblivion. 

Just to maintain some perspective, nothing in our bill would keep eligible individuals from receiving premium tax credits to pay for coverage.  Nothing would require those who are eligible for Medicaid to opt-out of receiving free health care.  And, of course, it wouldn’t tell those who are offered insurance from their employers to refuse it. 

Also, let’s keep in mind that the mandate has been a pretty ineffective tool.  It hasn’t prevented premiums from skyrocketing, nor has it kept insurers from leaving markets. 

So, in the end, keeping the individual mandate tax in place means retaining the status quo, which isn’t working all too well.  Zeroing it out means we have a chance to provide greater tax relief to middle-class families, through both reduced penalties and lower overall rates. 

Ultimately, I’m more than willing to defend the decision to end the individual mandate taxes as well as the decision to include it in the modification.  It’s the right thing to do.  Far more people will be better off as a result. 

I think the original chairman’s mark provided an exceptional path forward on tax reform, both in terms of middle-class tax relief and economic growth.  But, today, I have to say that the modification is a significant improvement.  It addresses problems noted by members on both sides and it will give Americans bigger paychecks, more opportunities, and a more prosperous economy. 

I look forward to another lively discussion here today.  But before I turn to Senator Wyden for his opening remarks, I want to make clear that I plan to keep things orderly today.  I will make sure that members are recognized so we all get a chance to speak and ask questions, but I won’t abide the disorder and hostility we witnessed yesterday afternoon.

I don’t begrudge anyone who expresses a passionate viewpoint, I just ask that members of the committee be respectful of one another. 

To view a full copy of the chairman’s modified mark, click here.

A score of the modified mark may be found here.