BEYOND THE NUMBERS
Wealthy, Corporations Still Win Big Under Senate GOP Health Bill Even With Possible Change
The core of the GOP health bill has always been tax cuts for the wealthy and corporations paid for by cutting provisions that help millions of low- and moderate-income families afford health coverage and care. Senate Republicans are now reportedly considering removing one of their bill’s many regressive tax cuts — repealing 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 said in supporting the change. But even with that change — which not all GOP senators agree with — the legislation would still fail Corker’s standard by providing an estimated nearly $400 billion in tax cuts from 2017 to 2026 that go overwhelmingly to high-income households and corporations.
These tax breaks include:
- Repealing the tax on insurers and cutting taxes for insurers with high-paid executives. 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. The bill would also cut taxes for insurers with high-paid executives by allowing insurers to deduct up to an additional $500,000 from their taxes for executives whom they pay over $500,000 each year, while weakening the ACA’s restrictions on those deductions. This would cost $500 million over ten years.
- 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, who own the bulk of stock and other investments, likely would ultimately enjoy the benefit of this tax cut as company profits expand.
- Significantly expanding Health Savings Accounts (HSAs), which do 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 maximum 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 are also reportedly considering adding 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.
- Repealing the Medicare additional 0.9 percent Hospital Insurance (HI) payroll tax on high earners, which would only benefit individuals with incomes above $200,000 ($250,000 for married couples), beginning in 2023, at a cost of $59 billion over ten years. Nearly two-thirds of the benefits would flow to millionaires and more than a quarter to the top 0.1 percent of households, who would ultimately get annual tax cuts averaging more than $44,000 apiece. Repealing this tax would weaken Medicare’s finances and hasten the HI trust fund’s insolvency since the revenues go to the trust fund. Other provisions of the bill would weaken the trust fund further; in total, the Senate bill would hasten HI’s insolvency by about two 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.
As a result, the Senate bill would still fail Corker’s test: it would still “lessen the burden” on higher-income Americans. It would also still dramatically “increase the burden on lower-income citizens,” including both low-income and middle-class households — even if the resources from maintaining the 3.8 percent tax on unearned income were put toward coverage.
In its current version, the Senate bill cuts $1.2 trillion from programs that help people obtain health coverage: $772 billion from Medicaid and $424 billion from subsidies that help moderate-income people afford marketplace coverage. Maintaining the tax on unearned income would fill only a fraction of that shortfall. Thus — with or without repeal of the 3.8 percent tax on unearned income — Senate Republicans will be left with a bill that fundamentally trades health care and coverage for millions of Americans for tax cuts for the wealthy and corporations.