What’s Next From Washington?

Navigating the intersection of law, policy and business has never been more precarious, particularly in light of ongoing debates and tweets coming out of Washington on matters with dramatic implications for business. After last November’s election brought unexpected results, debate rages on regarding the Trump presidency’s ability to translate rhetoric into results, with potentially seismic impacts in the economic, political, legal and social arenas.

I recently moderated a Policy Forum with several of our Brownstein Hyatt Farber Schreck Washington policy professionals to discuss expectations under the Trump administration. Policy Director Cate McCanless and Strategic Advisor Barry Jackson joined me for a panel discussion on health care, then Shareholder Greg Berger joined us for a broader discussion on tax reform and other business considerations.

HEALTH CARE

Any Room for Bipartisanship Between Repeal and Replace, and Medicare for All?

President Donald Trump’s promise to repeal the Affordable Care Act (ACA) has raised the stakes for health care, particularly with health-care costs representing 18 percent of the U.S. economy. Escalating polarization undermines the potential for compromise solutions, with repeal and replace still commanding loyalty on the right, and “Medicare for all” becoming a litmus test on the left. Given that reality, bipartisanship remains in short supply. Most recently, Sens. Lamar Alexander (R-TN) and Patty Murray (D-WA) announced their agreement on a deal to make basic tweaks to the ACA, funding the insurance subsidy program for individual markets in return for giving states some flexibility in compliance with ACA mandates. Within 24 hours, President Trump both endorsed and soundly rejected this “band aid,” lamenting the insurance subsidy program for individual markets as “bailouts for insurance companies,” notwithstanding the fact that cancelling it will cost the U.S. government an additional $6 billion in tax credits for low-income Americans to purchase insurance.

These are far from the only issues on the health-care agenda. The possibility of restructuring Medicaid, the individual mandate and retaining popular ACA provisions have also generated debate on the Beltway. Nonetheless, the sound and fury on Capitol Hill focuses on diametrically opposed proposals on how we pay for our health care, with very little attention paid to reforming how the country actually delivers care: most Americans receive their health care under the fee-for-service model, a system that does little to dissuade consumption by patients, and rewards volume rather than quality of care for providers.

TAXES

Fundamental Tax Reform, Tax Cuts and Impacts on Business

The tax reform debate includes grand ambitions with the potential to dramatically impact U.S. businesses. Current proposals contemplate a 20 percent corporate tax rate, along with a 25 percent rate for partnerships and pass-through entities, expensing for capital investments excepting structures and limits on net interest expense deductions for C corporations. Members of Congress are also eyeing a territorial tax system with a minimum tax on foreign earnings to address the substantial amount of revenue for U.S. corporations earned abroad, with the possible result that substantial sums could be “repatriated” back to the U.S. It’s also possible we’ll see a greater portion of private equity “carried interest” facing taxation at typical income rates instead of capital gains rates. The debate includes a variety of individual tax changes as well, including possible moves in three tax brackets, doubling the standard deduction, repealing personal exemptions and repealing the estate tax, among many others.

More than anything, with the end of the year rapidly approaching, Republicans in Congress are racing to get tax reform through. According to Brownstein Strategic Advisor Barry Jackson, tax reform continues to be a top priority for Republicans due to upcoming midterm elections and a desire to bring some kind of accomplishment home to their constituents. However, can tax reform get accomplished by the same GOP caucus that allowed the Affordable Care Act to live on despite so many prominent promises of repeal and replace? “The difference between tax reform and health-care is (tax reform) is an existential issue for Republicans,” he said during the panel discussion. “Sometimes in politics, action is what matters.” Businesses of America, take notice: Washington insiders believe that something will happen on taxes in the next two to three months; whether that resembles true tax reform, or simply a tax cut remains to be seen.