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The current ACA health premium tax credit is awful

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Some readers have emailed me to argue that the idea of switching to a new, age-based individual health insurance tax credit is a bad idea.

Many Democrats who support the current Affordable Care Act system say a pure age-based tax credit would give too much help to healthy, high-income people, and too little help to older, sicker, lower-income people.

Some Republicans, apparently, hate the idea of making the new tax credit a “refundable” tax credit. A refundable tax credit would pay cash back to taxpayers who earned too little to subtract the full value of the credit from their taxes. Some very conservative Republicans object to the idea of taxpayers getting extra back from the government.

Related: Trump backs health tax credits that have split Republicans

I don’t have any idea how these tax credits would really work, or whether some other approach might not work better. But I do know this: The current Affordable Care Act advance premium tax credit system is terrible.

Most people apply for individual health coverage for a year in November or December before the year starts. The current system forces those people to guess what their income will be in the coming year, so the government can pay the right amount of APTC subsidy money to the health insurers.

The APTC users are then supposed to tell the Internal Revenue Service how much tax credit subsidy help they received for the tax year early in the following year, when they file their federal income taxes.

If, for example, I were using the APTC subsidy to pay for coverage now, I probably would have had to guess what my full 2017 income would be in November. Then, I’d have to figure out how to tell the IRS about my use of the tax credit by April 15, 2018.

It’s hard for me even to describe, generally, how the APTC system works, and I’ve been writing descriptions of it since 2013. I don’t think expecting moderate-income working people to predict what their income will be makes any sense at all.

One thing the current political season is showing is that just about everyone in Washington has been hacked, and has made questionable use of a personal email account.

The complicated APTC system probably turns many nice people who use the tax credit into accidental tax cheats. Many people probably snooze through income-change reporting deadlines and make other mistakes that, technically, make them very, very bad people.

Whatever the right system is, that can’t possibly be it. Whatever happens to the rest of the ACA, there has to be some way to replace the APTC system with a system that does away with the need for psychic abilities. 


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