Sen. Lamar Alexander, R-Tenn., and the other Republican Senate leaders could use part or all of the revenue from the two taxes to pay for other ACA changes. Negotiators could use the revenue to reduce the effect of ACA changes on the federal budget deficit, or to soften ACA benefits cuts.
Members of the House passed their ACA change package, H.R. 1628, the American Health Care Act bill, by a 217-213 vote Thursday. Alexander, the chairman of the Senate Health, Education, Labor and Pensions Committee, said in a statement that he and colleagues are working on their own bill.
The ACA Medicare surtax, or additional Medicare tax, is a 0.9% tax that affects workers who have wages, compensation and self-employment income over a threshold amount. The threshold amount is $200,000 for individuals and $250,000 for couples. The affected taxpayers must pay the surtax on any wages they earn over the threshold amount.
The net investment income tax is a 3.8% tax on net investment income for taxpayers with modified adjusted gross income over a MAGI threshold. The MAGI threshold is $200,000 for individuals and $250,000 for couples. The tax applies either to the affected taxpayer’s net investment income or the difference between the MAGI threshold and the taxpayer’s modified adjusted gross income, whichever is less.
Analysts at the Congressional Budget Office looked at the budget impact of those two taxes in March, when they reviewed an early version of the American Health Care Act bill.
The analysts found that repealing the Medicare surtax could cost the federal government $6.5 billion in tax revenue in 2018, and $117 billion for the 10-year period from 2017 through 2016.
Repealing the net investment tax could lead to the loss of $10.5 billion in revenue in 2018, and $158 billion over 10 years, according to the analysts.
Combined, repeal of both taxes could cost $275 billion over 10 years. That figure amounted to 31% of the $883 billion in predicted AHCA bill-related revenue losses listed in the CBO analysis.