Life Health > Health Insurance > Your Practice

Key Republicans Want to Scrap Health Bill's Tax Cuts for Wealthy

Your article was successfully shared with the contacts you provided.

(Bloomberg) — Several Senate Republicans began to question Wednesday whether their health care bill should repeal a tax on high-income Americans imposed by the Affordable Care Act when the legislation would scale back subsidies for the poor.

Susan Collins of Maine and Mike Rounds of South Dakota both criticized the draft Better Care Reconciliation Act bill released by Majority Leader Mitch McConnell for repealing a surtax on net investment income imposed under the Affordable Care Act.

(Related: Hospital Chains Can’t Move Home-State Republicans on ACA)

“I do not see a justification for doing away with the 3.8% tax on investment income, because that is not something that increases the cost of health care,” Collins said. “So I distinguish between those tax increases that were part of Obamacare that increase premiums and the cost of health care versus those that do not.”

A third Republican, Bob Corker of Tennessee, expressed discomfort with the idea of cutting Affordable Care Act taxes on the rich while transferring burdens on the poor.

Scaling back the BCRA bill tax cuts could provide a path to winning over key moderate senators who have recoiled at the soaring premiums and deductibles for millions of low-income people as scored by the CBO, and the estimated 22 million fewer people who would have insurance in a decade. Meanwhile, conservatives have pushed to wipe out all of the taxes, though senators like Ted Cruz have not insisted every tax cut remain as part of an overall deal. Conservatives have been focused more on cutting regulations to lower premiums.

Up to now, senators had largely been focused on the bill’s health care effects. But its tax cuts, many of which would benefit the wealthy, are politically sensitive, particularly given statements by President Donald Trump that the GOP health bill shouldn’t be “mean.”

Tax Credits

GOP leaders were forced to delay a planned vote on the health bill this week after five Republicans said they would vote against a key procedural motion. Several more Republicans came out against the measure after the delay.

The draft legislation would eliminate a 3.8% tax on net investment income such as capital gains and dividends for people who earn more than $200,000 and couples with incomes over $250,000 — retroactively, effective Dec. 31, 2016. Ending the tax would cost the federal government about $172 billion over a decade, the Congressional Budget Office estimated.

Rounds called for using the savings to expand tax credits for Americans who are currently ineligible for assistance because their spouses have employer plans that don’t cover them. The South Dakota Republican said GOP leaders have told him the proposal would receive a CBO score.

“If we could make a change in that, I really think we could help millions of people,” Rounds told reporters after a Republican lunch discussion. “These are folks who get nothing.”

Schumer Response

McConnell has said eliminating the new taxes created under the Obamacare law would put downward pressure on rising health insurance premiums. A McConnell spokesman didn’t immediately respond to a message asking if he’s open to keeping the net investment tax hike.

Collins, whose opposition contributed to forcing McConnell to cancel a planned vote this week, said she doesn’t think the tax cuts for the wealthy should be in the bill. She argued that some of Obamacare’s taxes increase the cost of health care and are worth repealing, citing the 2.3% sales tax on medical devices.

Democrats have pilloried the Republican legislation as a redistribution of wealth from the poor to the rich, noting nonpartisan estimates that it would cut Medicaid, a health insurance program for low-income Americans, by $772 billion over a decade, and that 45% of its $700 billion tax break would go to the top 1% of earners.

Senate Minority Leader Chuck Schumer said Wednesday that the GOP bill would “cut support for Americans in nursing homes, those suffering from opioid addiction, and those with a pre-existing condition to pay for a tax break for the wealthiest few.”

The critiques of the tax breaks come as new surveys released Wednesday found that the Senate Republican health care bill is unpopular — a Quinnipiac poll showed that just 16% of Americans support it, while a USA Today/Suffolk poll found the number even lower at 12 percent.

‘Larger Burden’

Corker, who faces re-election in 2018, voiced hesitation with tax cuts for the highest earners. Apart from the net investment income tax, the Republican bill repeals a 0.9% Medicare surtax on incomes above the same thresholds after 2022.

“I want to make sure that we’re not in a situation where we’re cutting taxes for the wealthy and at the same time, basically, for lower income citizens, passing a larger burden on to them,” Corker said.

Told that what he described is what the CBO projects would happen, he responded, “So that needs to be overcome then, doesn’t it?”

One prominent conservative, Mike Lee of Utah, has also expressed discomfort about the structure of the Senate bill.

He said in a statement Tuesday that the legislation “included hundreds of billions of dollars in tax cuts for the affluent, bailouts for insurance companies, and subsidies for lower-income Americans. But it ignored the middle-class families who have borne the brunt of Obamacare.”

— Check out Senate Bill Could Add 22 Million to 2026 Uninsured Total: CBO on ThinkAdvisor.