The 2010 Affordable Care Act ratcheted up taxes for the richest Americans while redirecting more than $16 billion to the poorest income bracket in the country, according to a report from the Congressional Budget Office.
Several new taxes in the law — often referred to as Obamacare — increased the average tax burden of the richest 1 percent of Americans by about $21,000 per year, decreasing their average annual income by about 1.2 percent, the CBO said in the report. The richest 20 percent of Americans paid, on average, an additional $1,100 annually because of these new taxes, the biggest of which include a tax on investment income and another on health insurers.
The provisions to raise money for the ACA did not go into effect until 2013, three years after the law's passage. The CBO's report is based on data from 2014 and does not include tax data since then. (The CBO report, which tracks American income inequality broadly, says there was not available relevant data for the years since.)
The report also shows the ACA boosted incomes for those at the bottom of the income distribution, primarily through expanding Medicaid, the nation's health insurance program for the poor, to millions more Americans.
The law increased the average income of the poorest 20 percent of Americans by $690 per person, and the average income of people in the second-poorest income bracket by an average of $560 per person. (The CBO counted social insurance benefits, including federal health care expenditures, as “income” for this analysis.)
Overall, Obamacare raised the average income of the poorest income bracket by nearly 4 percent. The law lifted the income of the second poorest bracket (with an average annual income of $42,000) by about 1 percent.
In 2014, the federal government spent close to $38 billion on Medicaid expansion, and more than half of that money went to the bottom 40 percent of income earners, according to CBO. Separate tax credits to low-income Americans on Obamacare's individual markets cost the federal government $15 billion, while subsidies to help insurance companies offset the cost of expensive patients cost an additional $3 billion, the report said. A majority of both these funds also went to the poorer half of the country.
The CBO's findings about Obamacare come at an uncertain moment for the law. Congressional Republicans struck a key provision of the Affordable Care Act through their tax bill last year, eliminating the individual mandate, which penalizes Americans who do not buy health insurance. Subsequent congressional budget deals also delayed several of the law's tax increases, primarily on industry. But only one of those, the health insurance tax, was used for this CBO analysis, and it has already gone back into effect, according to Larry Levitt, a health expert at the Kaiser Family Foundation.
Republicans have chipped away at the law in other ways that could diminish its generosity for poorer Americans. President Trump has opened the door for states to impose work requirements and other penalties on Medicaid populations, which experts say could push millions of low-income Americans off the program. The administration has also cut funding for outreach to potential enrollees in the law's insurance exchanges. Eliminating the mandate alone will cut federal health spending by $338 billion over 10 years and reduce the number of uninsured people by 13 million, the CBO said last fall.
But the law's tax increases on the rich largely remain intact. Penalties for violating the individual mandate accounted for about $2 billion annually of the $40 billion raised under Obamacare through new taxes. The biggest tax passed under the Affordable Care Act, the one on investment income, remains in place, and nearly 100 percent of it was paid by Americans in the top income bracket.
“The ACA has been wounded through Republican efforts, but the big benefits to low-income people are still intact,” Levitt said. “Redistribution is controversial, and that's what made passage of the ACA so remarkable.”