Juniper Research Group — Gov. Jindal Op-Ed: Republicans Shouldn’t Try to Save Obamacare Subsidies in Wake of King Ruling

A Supreme Court ruling restoring the original language of Obamacare — nullifying the administration’s rule, and striking down subsidies in the 37 states — would have several knock-on fiscal effects. Because Obamacare’s employer mandate is directly tied to the subsidies — firms not offering coverage pay the penalty only if their workers receive federal premium assistance — the mandate taxes will disappear in those 37 states. Likewise, the individual mandate’s affordability test is linked to the subsidies; the mandate only applies if coverage is affordable after any premium subsidies received. Removing them will dramatically weaken the individual mandate, reducing both the number of people to whom it applies and the amount of revenue it will raise.

As a result, a ruling in King v. Burwell striking down the subsidies would represent a sizable tax cut. The Congressional Budget Office (CBO) January baseline gives the numbers: Eliminating the employer mandate nationwide would cut taxes by $164 billion, and weakening the individual mandate — assuming it would no longer apply to any individuals who heretofore qualified for subsidies — would cut taxes nationwide by approximately $18 billion. Conversely, eliminating the subsidies would raise taxes, but only by $134 billion. That’s because most of the subsidies ($775 billion worth) come in the form of refundable credits — the government writing checks to individuals with no income-tax liability — which budget scorekeepers consider not a tax cut, but government outlay spending.

Eliminating the subsidies nationwide would therefore cut Americans’ tax liability by approximately $48 billion on net. Granted, these sums from CBO apply to all 50 states, while the King ruling would apply only to the 37 states that have not established exchanges. But the trend from the numbers is crystal clear: The tax reduction from eliminating the employer mandate, and weakening the individual mandate, outweighs any tax increase from eliminating the subsidies — meaning a favorable ruling in King v. Burwell would cut Americans’ taxes by many billions.

That’s a “solution” in search of a problem. If eliminating the subsidies represents a net tax cut, then restoring the subsidies — whether by states creating their own exchanges, Congress passing new legislation, or some combination of the two — would re-impose a sizable tax increase. Americans would pay billions more in higher taxes to fund the newly restored subsidies, making Obamacare that much more entrenched. What self-proclaimed conservative of sound mind would do such a thing?

Alternatively, some have talked about enacting a “compromise” that would restore the Obamacare subsidies while reforming some of the law’s new insurance requirements and regulations. But restoring the flow of subsidies means restoring the employer mandate, thus raising taxes. And even if such a “compromise” weakens or eliminates the employer mandate, the Obama administration — to say nothing of the insurance companies themselves — will hardly countenance a repeal of the individual mandate, which restoring the subsidies will only strengthen. So those seeking to restore the flow of subsidies will likely end up having to raise taxes on millions of Americans, in some way, shape, or form.

As they ponder both these facts and their response to King v. Burwell, conservatives would do well to remember President Bush’s view of his 1990 tax reversal: “I did it, and I regret it, and I regret it.” Republicans have spent the past 25 years fighting efforts to raise taxes — and the past five years fighting Obamacare — in an effort to restore the trust of the American people lost on that fateful day in October 1990. As we saw then, neither history nor the voters will be kind to those politicians who choose to break their word to the public. Here’s hoping that conservatives of all stripes have finally learned that lesson.