BEYOND THE NUMBERS
Senate Republicans have removed two of their health bill’s many regressive tax cuts — those repealing the so-called Medicare taxes (the additional 0.9 percent Hospital Insurance payroll tax on high-income people and the 3.8 percent tax on unearned income) — to address concerns that the bill favors the wealthy. “It’s not an acceptable proposition to have a bill that increases the burden on lower-income citizens and lessens the burden on wealthy citizens,” Senator Bob Corker has stated. But even with that change, the bill would fail Corker’s standard. It would still include nearly $400 billion in tax cuts overwhelmingly for high-income households and corporations, including new tax cuts for Health Savings Accounts favoring the wealthy. The core of the bill would remain tax cuts for the wealthy and corporations that are financed by cutting assistance to help millions of low- and moderate-income families afford health coverage and care.
The bill’s tax breaks include:
- Repealing the tax on insurers. The bill would eliminate the tax on insurers that helps finance the Affordable Care Act’s (ACA) coverage expansions, at a cost of $145 billion over ten years. The biggest insurers would receive the biggest tax cuts. Even while cutting taxes on insurers, the bill cuts subsidies that help low- and moderate-income families afford insurance.
- Eliminating a tax on drug companies, which would cost $26 billion from 2017 to 2026. Manufacturers and importers of brand-name prescription drugs pay this tax based on their brand-name drug sales to government health programs. Wealthy shareholders and other investors likely would ultimately enjoy the benefit of this tax cut as company profits expand, since they own the bulk of company stock and other investments. In 2022, the cost of this tax break would roughly equal the bill’s savings from cutting tax credits and subsidies that help low- and moderate-income families in 20 states and the District of Columbia combined afford quality coverage and care (see chart).
The companies benefiting from this tax cut would likely include several that state Attorneys General have sued for their role in the opioid crisis. And, the bill pays for the tax cut in part by deeply cutting Medicaid, which has a crucial role in combating the opioid crisis.
- Significantly expanding Health Savings Accounts (HSAs), which do little or nothing to help the uninsured afford coverage but create lucrative tax-sheltering opportunities for wealthy people. High-income households receive the bulk of HSA benefits under current law, and the Senate bill would tilt those benefits even further to the top by roughly doubling the annual contribution limit, which would only help people wealthy enough to “max out” their contributions under the current limits. The provision would cost $19 billion over ten years. Senators also added another HSA expansion to the bill, which would provide even more lucrative benefits to the wealthy by letting HSA account holders use the funds to pay their health insurance premiums, at a reported cost of $60 billion over ten years.
- Letting filers claim medical expenses exceeding 7.5 percent of their adjusted gross income (AGI) as an itemized deduction, reversing an ACA provision that had raised the threshold from 7.5 percent of AGI to 10 percent. That would overwhelmingly benefit higher-income taxpayers, at a cost of $36 billion over ten years. Over three-quarters of the tax savings from lowering the threshold to 7.5 percent would go to taxpayers with incomes over $100,000, the Tax Policy Center estimates; less than 3 percent would go to taxpayers with incomes below $50,000.
- Repealing the medical device tax. The tax is intended to ensure that the medical device industry, which benefits from higher sales due to the ACA’s improved health coverage, contributes to health reform provisions that enable millions of Americans to afford that coverage. Repeal would cost $20 billion over ten years.
While Senate Republicans may have decided not to repeal the Medicare taxes in their health bill, they may seek to repeal them in a future tax bill. Both the Trump Administration’s tax plan and the House GOP “Better Way” tax plan would repeal the 3.8 percent tax on unearned income. In response to the reported dropping of the Medicare-related tax cuts from the Senate health bill, Americans for Tax Reform President Grover Norquist said, “there’s a tax cut coming, so we’ll get this. . . . This is three-dimensional chess.” In short, the wealthy and corporations would be big winners under the Senate GOP health bill, even with its revisions, and could get even bigger tax cuts in an upcoming GOP tax package.
- El crédito tributario por hijos
- Federal Payroll Taxes
- Federal Tax Expenditures
- Fiscal Stimulus
- Marginal and Average Tax Rates
- Tax Exemptions, Deductions, and Credits
- The Child Tax Credit
- The Earned Income Tax Credit
- The Federal Estate Tax
- Where Do Federal Tax Revenues Come From?
- Where Do Our Federal Tax Dollars Go?