The tax credits could create a very thorny problem for both House and Senate Republicans. The House leadership bill prohibits the use of its tax credits for health plans that cover abortion. Due to an arcane Senate rule, Democrats likely can and will strip any such restrictions from the bill before final passage. This means that if the House bill ever makes its way to President Trump’s desk, it could subsidize abortion even more than ObamaCare does.
To the extent the bill’s modified tax credits are tax reduction, however, they are the functional equivalent of ObamaCare’s individual mandate. The flip side of tax credits that are available solely to those who purchase health insurance is that those who do not purchase insurance must pay more to the IRS than those who do. Just like a mandate. And since the effective penalty is just an increase in the taxpayer’s income-tax liability, tax credits for health insurance are actually more coercive than ObamaCare’s individual mandate, because the IRS has many more tools it can use to collect the penalty.
Conservatives deny any similarities between an individual mandate and a tax credit for health insurance. But consider the following. ObamaCare’s individual mandate penalty for single adults is $695 or 2.5 percent of income, whichever is greater. Suppose that instead, Congress had simply enacted a tax with those features, and then come back and provided an equivalent tax credit for anyone who purchases health insurance. The end result would be identical to ObamaCare’s individual mandate. But which would it be, a tax credit or a mandate?
Like ObamaCare’s tax credits, the House leadership’s tax credits would involve burdensome projection and verification of the taxpayer’s income (taxpayers above a certain threshold are ineligible for credits) as well as whether the taxpayer has an offer of qualified health insurance from an employer (taxpayers with an offer of coverage from an employer are ineligible).