Wealthy Americans May Get Hefty Tax Cut with Repeal of Obamacare

Sunday, December 18, 2016
(graphic: CSA Images/B&W Archive Collection)

By Ricardo Alonso-Zaldivar, Associated Press

 

WASHINGTON (AP) — Republicans may be handing wealthy Americans a big tax cut by repealing President Barack Obama's health care law, according to a study released Thursday that spells out potential economic pitfalls behind the election-year slogans.

 

The richest households — those with incomes above $3.7 million — would get an average tax cut of about $197,000, said the analysis from the nonpartisan Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution think tanks.

 

The windfall would come mainly from the repeal of taxes that the Affordable Care Act aimed at upper-income earners, including an investment tax and a Medicare levy.

 

The study comes as Republican lawmakers and aides start grappling with the complexity of unraveling the 2010 law, which touches most major players in the $3 trillion health care industry.

 

While Republicans plan to take just a few months next year to pass legislation dismantling the law, that "repeal" may not actually take complete effect for up to four years, top House GOP aides told reporters Thursday. Congress would need the time to pass replacement legislation and work out a smooth transition.

 

The Tax Policy Center study did not consider the impact of replacement legislation, so its look at potential winners and losers is preliminary.

 

President-elect Donald Trump and GOP congressional leaders have promised to replace "Obamacare" with a conservative-tinged version that provides access to affordable coverage for all Americans. Details of that plan are unavailable, but it's bound to affect the final bottom line.

 

The "repeal" part of the GOP promise would definitely have one-sided consequences, said Gordon Mermin, an Urban Institute researcher who conducted the study.

 

"This is a change that helps high-income folks more than everyone else," said Mermin. "People who currently get these premium tax credits are going to lose a lot."

 

The impact is more complicated for middle- and low-income households. The vast majority would see little or no change in taxes. Repeal of various taxes on the health care industry would get passed through as modest benefits for most.

 

But more than 8 million consumers receiving tax credits through the law to help pay for health insurance could take a significant hit. They would lose financial assistance worth several thousand dollars. How big a loss depends on individualized factors such as household size and family income.

 

The study did not look at the impact on insurance coverage. Obama's law has helped drive the nation's uninsured rate to a historic low of about 9 percent. A separate Urban Institute study earlier projected that nearly 30 million people could lose coverage if Obama's law is repealed without a replacement.

 

GOP aides who briefed reporters Thursday on Capitol Hill said a stable and orderly transition is one the party's top goals. The aides spoke on condition of anonymity to discuss the broad outlines of a private dialogue among Republican decision-makers.

 

The long transition period under consideration — two to four years — reflects a desire to avoid disrupting existing coverage for consumers and to give lawmakers time to create a new health care program. It's an exercise fraught with policy and political complications. Four years would put Republicans on the threshold of the next presidential election.

 

During that period, Republicans hope to write replacement legislation, perhaps with several bills whose provisions would kick in stage by stage.

 

Associated Press writer Alan Fram contributed to this report.

 

To Learn More:

            Distribution of Affordable Care Act Taxes - Dec 2016 (Tax Policy Center)

Only 1 in 4 Americans Want Health Care Law Repealed (by Ricardo Alonso-Zaldivar, Associated Press)

Health Care Law Successes Pose Problem for Republicans Who Denounce It (by Ricardo Alonso-Zaldivar, Associated Press)

Repeal of Affordable Care Act would Increase Output, but would also Increase Deficit and Number of Uninsured (by Steve Straehley, AllGov)

Republicans Strike Out in Search for Americans Hurt by Obamacare (by Noel Brinkerhoff, AllGov)

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