Key Takeaways
- The Senate held two failed votes to address expiring healthcare tax credits.
- A deal is still possible, but there’s not much time to address the issue before year-end.
- A solution in January would be more complicated as people buy insurance for the year.
- Treasury to offer corporate tax relief on R&D credit.
- House tax committee passes taxpayer privacy bill.
It’s one week closer to the end of the year, but Congress is no closer to reaching an agreement on soon-to-expire tax subsidies for health insurance.
On Thursday, the Senate held two votes on competing proposals, including one from Democrats to extend for three years enhanced premium tax credits for healthcare plans purchased through the Affordable Care Act state exchanges. That vote was promised by the Senate Republican leadership as part of an agreement re-open the government after the shutdown earlier this fall.
Senators also voted on a Republican measure that would have expanded tax-favored health savings accounts, as an alternative to extending the ACA credit enhancement. Neither bill received the 60 votes necessary to proceed to passage.
It is now only a matter of days until the credits expire, and premiums in the exchanges are expected to increase, in some cases substantially.
There are so many proposals in Congress right now to address the credit expiration—one way or another—that it’s hard to keep track. Many Republicans are bucking their party leadership to support an extension, with some changes. Others are refusing to consider adding new funding to Obamacare in any shape or form. President Trump’s mixed messages aren’t moving the debates in any direction.
Moderates from both parties say they’re still talking about some compromise. House Speaker Mike Johnson has promised to hold a vote on one of the extension proposals. But with both chambers set to leave DC for the year at the end of next week, time may have run out to extend the credits before they expire at the end of the year. They could still return to address the issue in January, but the mechanics of a change would become much more complicated as Americans buy insurance for the year. (Many of the proposals would extend open enrollment periods.)
Any sort of bipartisan deal would likely pair an extension with some changes that limit the credits, without completely overhauling the structure. An income limit on who could enroll, larger than the cap on those earning more than 400% of the poverty level that will apply after the enhancement expiration, is one potential compromise. Republicans are also pushing for measures to crack down on “ghost beneficiaries”—enrollees who do not file for any claims, that may be unaware they are receiving tax-subsidized insurance. While Democrats dispute how serious a problem this is, or if fraud is a major reason healthcare costs continue to rise, it’s one area they may be willing to consider as a way to strike a bargain.
Healthcare has vexed both parties for decades. Few issues in politics are as complex—or affect as many people. A week is not enough time to wrangle with these questions, but it may be all Congress has before the issue gets even more complicated and difficult.
Recent Tax Pieces:
Doomed Health Votes Double as Political Weapons for Democrats – Erin Durkin and Lillianna Byington, Bloomberg Tax ($):
“My assessment, that they want a political weapon,” Sen. Bill Cassidy (R-La.) said Tuesday. “I’m hoping that is not true.”
GOP health care chaos spills into battleground midterm races – Lisa Kashinsky and Alec Hernandez, Politico:
Out of the 24 candidates POLITICO surveyed across key GOP Senate primaries and general election battlegrounds, 10 did not respond to repeated requests for comment on their health care policy preferences, while others gave vague answers.
Treasury Plans to Boost Trump’s Tax Savings for Corporations – Caitlin Reilly, Bloomberg Tax ($):
The tax guidance is the latest win for large corporations and would provide additional tax benefits to companies on top of the tax incentives they won in Trump’s tax bill which passed Congress in July. That bill restored full, upfront deductions of R&D investments, which had lapsed in 2022.
See more about this issue.
Ways and Means Advances Taxpayer Privacy, Taser Taxation Bills – Cady Stanton, Tax Notes ($):
Ways and Means Chair Jason Smith, R-Mo., said during the markup that the legislation would force the IRS “to be more transparent when asking third parties for confidential information about a taxpayer.”
Lawmakers Mixed on Trump Dismissal of Second Reconciliation Bill – Cady Stanton, Tax Notes ($):
“I think the president is saying, ‘Look, can we do that again, can’t we do it again?’ We’ll see. I would not be surprised if we had a second one,” said House Ways and Means Committee member Mike Kelly, R-Pa.
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