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ACA Repeal Would Deliver Billions in Tax Cuts to the Top

Republicans’ planned bill to repeal the Affordable Care Act (ACA), which is expected to be similar to the repeal bill that President Obama vetoed in January 2016, would give an immediate windfall tax cut totaling billions to the highest-income Americans by eliminating two Medicare taxes — the additional Hospital Insurance tax and the Medicare tax on unearned income — that both fall only on high-income filers, as we explain in two new papers. At the same time, Republicans’ plans for ACA “repeal and delay” would likely significantly raise taxes on about 7 million low- and moderate-income families by eliminating their premium tax credits and would threaten existing coverage for millions more.

The size of the tax cuts for the highest-income households is staggering. Millionaire households would reap a full 80 percent of the tax cut from repealing these two provisions in 2017, as our first analysis explains using Tax Policy Center (TPC) estimates. Their tax cuts would average $49,370 apiece.

The very highest-income households would benefit even more. The top 400 highest-income filers had adjusted gross incomes averaging $318 million in 2014 (the last year for which data are available), according to the Internal Revenue Service. If their income levels and income sources in 2017 are similar to those in 2014 and the ACA’s Medicare taxes on high-income households are repealed, our second analysis estimates that:

  • The top 400 filers will get tax cuts averaging roughly $7 million apiece;
  • They will receive a net total of about $2.8 billion in tax cuts — roughly $28 billion over ten years if these levels remain similar; and
  • The incomes of the top 400 after federal income taxes would rise by almost 3 percent.

Meanwhile, the roughly 160 million households with incomes below $200,000 would get nothing from the repeal of these two taxes. In fact, ACA repeal would significantly raise taxes on about 7 million low- and moderate-income families due to the loss of their premium tax credits — worth an average of $4,800 in 2017 — that help them buy health coverage through the health insurance marketplaces and afford to go to the doctor when needed.

The total tax cut for the top 400 is roughly the value of premium tax credits that 813,000 people in the 20 smallest states and Washington, D.C. would lose combined if the ACA is repealed without a replacement (see graph).