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Senate Tax Bill Would Add 13 Million to Uninsured to Pay for Tax Cuts of Nearly $100,000 Per Year for the Top 0.1 Percent

Senate leaders’ new version of their tax bill adds a provision repealing the Affordable Care Act’s individual mandate, the requirement that most people enroll in health insurance coverage or pay a penalty. The revised Senate bill also sunsets most of its individual income tax cuts after 2025, to comply with Senate rules that prohibit bills considered under fast-track “reconciliation” procedures from increasing long-term budget deficits. But the revised bill maintains a permanent cut in the corporate tax rate, from 35 percent to 20 percent. The savings from individual mandate repeal would pay for about one-third of that permanent rate cut, Joint Committee on Taxation (JCT) estimates show.

Eliminating the individual mandate would:

  • Increase the number of Americans without health insurance by millions starting in 2019, when the individual mandate would be repealed, and by 13 million in 2027, according to recent Congressional Budget Office (CBO) estimates. That would increase the uninsured rate for non-elderly Americans from about 11 percent to about 16 percent.
  • Increase individual market premiums by about 10 percent, according to CBO. That amounts to a premium increase of hundreds of dollars per year for about 7 million mostly middle-income consumers — and over $1,000 per year for many older people.
  • Create further instability for the individual market, especially in the near term. Substantial declines in enrollment and much greater uncertainty and confusion would make it harder for insurers to forecast their risk pools. Some might opt to exit the market altogether. 

As we’ve explained, the savings from eliminating the mandate would come entirely from reducing health coverage. For example, the federal government would spend less on premium tax credits because fewer people would sign up for marketplace coverage, less on Medicaid because fewer people would enroll, and less on the tax exclusion for employer-sponsored health insurance because fewer employees would enroll in job-based coverage.

These savings are what let Senate leaders make their full corporate rate cut permanent. Without repeal of the individual mandate, the long-term costs of the corporate rate cut ($171 billion in 2027 alone) would have exceeded the savings from the bill’s offsetting revenue raisers, even after Senate Republicans modified their bill to have its individual income tax cuts expire after 2025. This math problem seems to have been a key part of the motivation for adding individual mandate repeal to the bill. With savings of $53 billion in 2027, the provision pays for making about one-third (about 4.7 percentage points) of the corporate rate cut permanent. Other provisions in the bill would cover the rest of the cost.

The benefits of corporate rate cuts go overwhelmingly to high-income households. Based on Tax Policy Center estimates (which are similar to those from the Treasury Department and JCT), we estimate that by 2027 a 4.7-percentage-point corporate rate cut would provide annual tax cuts worth an average of:

  • $14,890 for households with incomes over $1 million; and
  • $94,540 for households in the top 0.1 percent (those with incomes over $3.1 million in 2017).

By contrast, a 4.7-percentage-point cut in the corporate rate would be worth an average of just $120 for households in the middle fifth of the income distribution. Individual income tax provisions meant to benefit middle-class families would expire after 2025 in the revised Senate bill, even as the corporate rate cut, individual mandate repeal, and an individual income tax change that increases taxes across the income distribution, including for middle-class families, would be permanent.

The congressional tax bills' tradeoffs were already stark: deficit-financed tax cuts sharply skewed to the highest-income households would ultimately have to be paid for with budget cuts or tax increases likely to harm low- and middle-income households. But these tradeoffs are now even clearer: 13 million Americans would become uninsured to finance tax cuts of nearly $100,000 for those at the very top of the income scale.