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    Election 2014: What to Expect from Republican Victory
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    Election 2014: What to Expect from Republican Victory

    November 2014

    The Republican sweep of the mid-term elections has left many Americans wondering what comes next.  The GOP ran on an ambitious platform centered on taxes, trade, energy, and financial regulation, and promised an all-out war on Obamacare.  Republicans say they’re gearing up to consider a string of issues that had been blocked by Senate Democrats (now unseated), and send bills to the President’s desk almost immediately.  But just how much can the Republicans do?  Can Obamacare be repealed?  Will tax reform really take place?  Here are the issues as I see them.


    Republican victory boosted the odds for a full-scale rewrite of business-tax rates and rules, and even Obama conceded in a post-election news conference that a rewrite could help boost business as well as bring infrastructure jobs, particularly in transportation.  But rewriting the world’s most complicated code is going to be extremely difficult.  Big tax bills pit industries and special interests against one another, raise partisan questions about boosting or cutting overall tax revenue, and require lawmakers to make terribly complicated decisions about industry -- particularly U.S. treatment of multinationals.  I’m not sure Congress -- regardless of who is in control -- is ready for that fight, particularly since another election hangs in the balance for 2016.  If a deal is to be reached, it will likely be struck by an agreement to use some portion of new tax revenue for investing in domestic infrastructure.  Both Democrats and Republicans have expressed concern about the state of the nation’s roads and bridges, and home state projects would likely generate interest in a tax overhaul if that rewrite generates upfront revenue by closing some lucrative business tax breaks in the near term while phasing in lower rates and other benefits that secure future economic growth.  Given a draft tax-overhaul bill authored by Ways and Means Chairman Dave Camp (R., Mich.), which earmarked about $125 billion for infrastructure, Republicans may very well take this approach.

    Health Care

    Republicans have been chomping at the bit to repeal Obamacare since the law was enacted in 2010.  Can they actually do it?  In a word: no.  The President would veto any such bill that called for outright repeal.  Even if he didn’t, Republicans would not want to be viewed as the party that snatched healthcare from the millions that have already enrolled in Obamacare.  That being said, expect a full repeal bill to come up for a vote at least once for show; Republicans will want to put Democrats on record as pro- or anti- Obamacare in 2016.

    What Republicans can do is undo specific provisions of the Affordable Care Act.  Those include the law’s tax on medical devices, the requirement that big employers provide insurance to all workers who clock more than 30 hours per week, and the individual mandate that slaps individuals with a fee if they don’t carry insurance.  President Obama has indicated that he’s open to other changes, and he’ll have to be if Democrats stand a chance in 2016.  Obamacare is still wildly unpopular among the public.

    “Hanging” Legislation

    GOP leaders in both chambers have signaled they want to clear the decks of leftover legislation before starting fresh in 2015.  With lawmakers returning to Washington this week, action on all “hanging” legislation is expected.  Of particular note is the Marketplace Fairness Act.  Under the Marketplace Fairness Act, states could collect a sales tax from online purchases made anywhere in the country, which supporters say would erase an unfair advantage now held by Internet retailers. Opponents of the sales tax bill say it would create huge burdens on smaller online outfits, and have pledged not to be outworked by the retail groups that are seeking an end-of-year victory.  Currently, because of a 1992 Supreme Court decision, state governments can only tax retailers that have a physical location within their borders.

    The Marketplace Fairness Act has a history of bipartisan Senate support, and its backers have long believed that it is just a matter of time before it gets across the finish line. If it’s going to happen, now is the time; the lame-duck session is notorious for deal-making.  Supporters on Capitol Hill have vowed not to pass an extension of a separate, non-controversial law barring taxes on Internet access unless it’s paired with an online sales tax measure.  They’ll launch an all-out lobbying blitz this week on Republicans who just want to be done with it.  I think has a pretty good chance of passing.

    This is certainly not an exhaustive list of issues.  Republicans have a number of Obama energy and trade policies in their sights (Keystone Pipeline, trade barriers, EPA emissions endless list) and they have their work cut out for them.  Only one thing is certain: Republicans (in House and Senate) will have a limited window to try and pass legislation before the 2016 presidential campaign overshadows their efforts.  GOP leaders in both chambers will have to move quickly when they take control in January.  Expect a lot of noise in the coming months.

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