The Washington PostDemocracy Dies in Darkness

How Republican-style health-care reform quickly becomes a tax cut for the richest of the rich

President-elect Donald Trump and House Speaker Paul D. Ryan (R-Wis.). (Alex Brandon/AP)

The election of Donald Trump with a Republican-majority Congress is proving once again that conservative economic policy largely reduces to cutting taxes, mostly for the rich.

But wait a second, aren’t they also wading into health-care reform?

They are, and it proves my point. While much attention is reasonably focused on how they’re all repeal with no replace — and how that’s likely to reverse the coverage gains we’ve seen and undermine insurance markets — there’s something else going on here. And that is — you guessed it — a big tax cut for the rich.

Unless your job description includes denying the facts around the Affordable Care Act, you probably know that it has provided health insurance coverage to 20 million people, lowering the uninsured rate to an all-time low of 9.1 percent, from 16 percent before the reform was enacted. What you might not know is that most of the revenue the ACA raised flows from some very rich waters.

Now, consider the implication of these two facts in the context of repeal and fail-to-replace. There’s been useful reporting on the tens of millions of people expected to lose coverage. But the other side of that equation is a big tax cut for the wealthiest Americans. In other words, the latest payback for some of the working class voters who helped elect the incoming president is to take away their health care and give the savings to millionaires and billionaires.

Just how fat a tax cut? That question is answered in a new report by three of my colleagues at the Center on Budget and Policy Priorities. Using IRS data, they show that the 400 richest Americans, whose average annual income is more than $300 million, would each get an average $7 million kickback from ending two ACA taxes: the 0.9 percent Hospital Insurance tax and the 3.8 percent unearned income Medicare tax. The base for both taxes are individuals with incomes above $200,000 and couples with incomes above $250,000, making this a highly progressive revenue source. That also means that the 160 million households with incomes below these levels get no tax benefits from repealing those taxes.

Indeed, as my CBPP colleagues point out, “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.” In fact, as the chart below reveals, the repeal leads to the richest 400 households getting a $2.8 billion tax break that’s bigger than the value of almost 670,000 ACA tax credits worth $2.5 billion going to people in Pennsylvania, Wisconsin and Michigan.

This isn’t just the usual Robin Hood in reverse we’ve come to expect from Republican tax plans: This is Robin Hood slamming the Batmobile into reverse at 100 mph.

Recent news reports tell of a few Republicans worrying that repeal might be courting more trouble than their colleagues realize. It’s clear that the president-elect had nothing in mind when he claimed during the campaign that he’d replace the law with “something terrific.” It’s also clear that after 6 years of their feckless and reckless fight for to kill the ACA, the repealers have few ideas for replacement. Importantly, the ideas they have floated — high deductible plans, health savings accounts, block grants for Medicaid and vouchers for Medicare — all shift more costs onto regular people relative to the current system. That is, in fact, the only possible outcome when you so deeply cut health care resources.

So perhaps the ACA repeal will founder on the shoals of political reality, but I doubt it. Reality isn’t exactly constraining this crew.

I recently wrote that I couldn’t think of one proposed Trump policy that would help the working class voters who supported him. These new numbers suggest that I didn’t go nearly far enough. It’s not just that the coming agenda won’t help Trump’s blue-collar constituents — not to mention those in the majority who opposed him — offset the economic costs they’ve borne by being on the wrong side of inequality and globalization. It’s that his policies will hurt them more, exacerbate their economic insecurity, and ratchet up the disparities they face.

Loading...