Senate Republicans on Tuesday announced a deal to repeal ObamaCare’s individual mandate as part of tax reform, and leaders claimed they have the votes to make it pass.

XAutoplay: On | OffIf so, they just cleared a huge hurdle to passing their 20% corporate tax rate as part of a big package of business and individual tax cuts that will effectively add up to $1.8 trillion — not just $1.5 trillion — over a decade.

Repealing the individual mandate to buy health insurance would save $338 billion to allow for bigger tax cuts, since ending the mandate would lead millions of people to drop subsidized coverage; yet it also would have the side effect of raising individual market health insurance premiums.

Really, the tax cuts on current income could add up to $2.1 trillion in the first decade if Congress adopts the House approach to taxing the past earnings that multinationals such as Apple (AAPL) and Google-parent Alphabet (GOOGL) have parked overseas to the tune of nearly $300 billion.

The S&P 500 index, Dow Jones industrial average and Nasdaq composite all suffered modest losses on the stock market today as Wall Street digested the news. Expect a more celebratory feel if and when Sens. John McCain, Susan Collins and Lisa Murkowski, the trio that defeated TrumpCare, say they support the GOP approach.

To keep moderates on board who killed ObamaCare repeal in September, GOP leaders say they’ll allow a vote on a bipartisan measure designed to stabilize the exchanges. Yet without the individual mandate, Democrats would never support the Alexander-Murray package that actually would save the government about $200 billion and likely destabilize the exchanges.

If Republicans can execute their plan, expect the next year — really the next decade — to be full of fiscal fireworks. The Congressional Budget Office said on Tuesday that passage of $1.5 trillion in tax cuts would automatically trigger about $90 billion in spending cuts in 2018, including Medicare. Given that backdrop, it’s hard to see how Republicans can move on to funding President Trump’s big infrastructure ideas in 2018.

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It’s still unclear how the GOP will deal with meeting the budget neutrality test after a decade, but the savings from killing the individual mandate will grow over time and make the job a bit easier.

The move to add individual mandate repeal to the tax bill reflects the big problem they face in addressing complaints that the GOP bills leave out big segments of the middle class while making their tax math add up to $1.5 trillion in deficits over the first decade and — a much taller order — no worse than deficit neutral beyond 2027.

Maine Sen. Susan Collins told reporters on Monday afternoon that she wants to see changes to the Tax Cuts and Jobs Act that shift more of the benefits toward the middle-class. She’s looking for a bigger refundable child tax credit and a smaller hit from the state and local tax deduction, which would both significantly increase the cost of the bill.

Potential offsets to those changes that Collins envisions would be a smaller reduction in estate taxes and a higher corporate tax rate.


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