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Facing the possibility that congressional Republicans and President Donald Trump will repeal the Affordable Care Act, Democrats are trying to warn Americans about some of the consequences. Sometimes, though, such warnings have gone too far.
One example is a statement by Sen. Claire McCaskill, D-Mo., in a Jan. 23, 2017, interview on MSNBC’s Morning Joe.
During a discussion of the women’s march held a few days earlier, McCaskill said Democrats needed to shine a light on potential policy changes by the Trump administration and the GOP-controlled Congress. As an example, she cited how the tax code could change if lawmakers repealed the ACA.
"Not one dime of the tax cut that they are going to enact with the repeal of Obamacare will go to people who make under $200,000," McCaskill said.
We’ll take a closer look at this statement, with the acknowledgement that we don’t know the final shape of a congressional repeal of the law (or, for that matter, whether one will happen at all). Of course, neither does McCaskill. We do know, however, that McCaskill is wrong to say that a repeal would only give tax cuts to the rich.
Taxes on the rich
While the Affordable Care Act is best known for its provisions aimed at expanding health insurance coverage, it is also a major tax bill, since its authors sought to provide ongoing revenue sources to support other portions of the bill.
When we checked with McCaskill’s office, they said that McCaskill was referring to a provision of the bill that imposed a 0.9 percentage point payroll surtax for individuals earning $200,000 or married couples earning $250,000, along with a 3.8 percent tax on unearned income for higher-income taxpayers.
This is indeed the biggest tax increase in the law. Shortly before it was passed, the Joint Committee on Taxation -- the bipartisan congressional panel that analyzes all proposed tax changes -- projected that these provisions would raise $210.2 billion in revenue over the 10-year period between 2010 and 2019.
We found another tax provision that would also benefit wealthy Americans -- one that limits the deductibility of executive compensation in the health insurance industry to $500,000. The Joint Tax Committee projected that this provision would generate much less revenue -- $600 million over 10 years.
The grand total for these tax cuts for high-income Americans, then, is nearly $211 billion.
This makes it clear that a full repeal of the Affordable Care Act’s tax provisions would enact a significant tax cut for Americans earning more than $200,000 a year.
Taxes on everyone else
However, the law imposed other taxes that would hit more than just the wealthy.
For instance, several provisions of the law changed the rules governing flexible spending accounts for medical expenses, such as limiting the maximum dollar amount people could put into them.
In addition, the law imposed a 10 percent tax on tanning-bed services.
Combined, the JCT projected that these provisions would raise more than $37 billion over 10 years.
But that’s not all.
The provisions we’ve listed so far in this section are direct taxes that could (and likely would) hit middle-class Americans. However, the law also contains taxes on drug makers and the health insurance industry that would likely be passed through to middle-class Americans.
According to JCT’s projection, the taxes on the drug and insurance industries would raise $87.1 billion in all. Not all of these costs would necessarily be passed on, but the yardstick used by the Urban Institute-Brookings Institution Tax Policy Center is that one-fifth of corporate taxes are passed through to workers, with the remainder swallowed by investors. So if we use the center’s one-fifth ratio, then the hit to middle-class Americans from these taxes would be about $17 billion.
Finally, a repeal would almost certainly lift the mandate that Americans purchase health insurance or else face a tax penalty. The JCT didn’t project how much revenue these tax penalties would generate, but the most recent report by the Treasury Inspector General for Tax Administration found that for the 2014 tax year, 8.1 million taxpayers had been hit by these tax penalties, totaling almost $1.7 billion.
So, over the 10-year window used by JCT, this provision would be expected to produce revenues of $17 billion over 10 years.
If you put all these categories together, the tax changes add up to $71 billion. Two independent experts -- Roberton Williams of the Tax Policy Center and Gail Wilensky, who headed Medicare and Medicaid under President George H.W. Bush -- told us that our analysis was sound.
McCaskill’s office, for her part, pointed to a Tax Policy Center analysis that showed high-income Americans reaping the majority of the tax benefits if all ACA taxes were repealed. For instance, those earning $1 million and up would see their taxes go down by about $50,000 each, while those earning between $500,000 and $1 million would see a tax cut of $4,580. By contrast, no income group lower than that would see an average cut (or in some cases, a tax increase) of more than a couple hundred dollars.
McCaskill’s office also cautioned that the JCT analysis is seven years old, and that it does not provide specifics about which taxes would hit income groups. They also cited news reports suggesting that the GOP was likelier to repeal the high-income taxes than the ones that tend to hit middle-income Americans.
Still, while a repeal of all taxes in the law would disproportionately benefit high-income Americans, McCaskill’s notion that "not one dime" of the tax benefits would go to ordinary Americans goes too far. While a minority of the total tax benefits from a repeal would end up in the pockets of ordinary Americans, the percentage is neither zero nor negligible.
McCaskill said, "Not one dime of the tax cut that they are going to enact with the repeal of Obamacare will go to people who make under $200,000."
She has a point that if all taxes in the law are repealed, then high-income earners are likely to reap a majority of the benefits. However, $71 billion in tax cuts spread more broadly across the income spectrum are a far cry from "not one dime." The statement contains some element of truth but ignores critical facts that would give a different impression, so we rate it Mostly False.
Claire McCaskill, interview with MSNBC’s Morning Joe, Jan. 23, 2017
Joint Tax Committee, "Estimated Revenue Effects Of The Amendment In The Nature Of A Substitute To H.R. 4872," March 20, 2010
Treasury Inspector General for Tax Administration, "Affordable Care Act: With Minor Exceptions, Controls and Procedures for Collection of the Shared Responsibility Payment and Excess Advance Premium Tax Credit Were Effectively Established," Sept. 19, 2016
Kaiser Family Foundation, "Summary of the Affordable Care Act," April 25, 2013
Internal Revenue Service, "Affordable Care Act Tax Provisions," accessed Jan. 25, 2017
Internal Revenue Service, "Medical Device Excise Tax: Frequently Asked Questions," accessed Jan. 25, 2017
Urban Institute-Brookings Institution Tax Policy Center, "T16-0285 - Repeal of all ACA Taxes, Including Premium Tax Credit by Expanded Cash Income Level, 2017," accessed Jan. 25, 2017
Center on Budget and Policy Priorities, "Eliminating Two ACA Medicare Taxes Means Very Large Tax Cuts for High Earners and the Wealthy," Jan. 11, 2017
Brookings Institution, "Paying for an ACA replacement becomes near impossible if the law’s tax increases are repealed," Dec. 19, 2016
Roll Call, "Obamacare Tax on Wealthy Sparks Battle Over Fairness," Jan. 9, 2017
The Hill, "GOP considers holding off on repealing ObamaCare taxes," Dec. 21, 2016
Email interview with Gail Wilensky, head of Medicare and Medicaid under President George H.W. Bush, Jan. 25, 2017
Email interview with Roberton Williams, Urban Institute-Brookings Institution Tax Policy Center, Jan. 25, 2017
Email interviews with John LaBombard and Sarah Feldman, spokespersons for Claire McCaskill, Jan. 25, 2017
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