Affordable Care Act Lawsuit Would Cut Taxes for Most Well-Off While Ending Health Coverage for Millions
If their legal position were to prevail:
* Households with incomes over
* Most of these tax cuts would go to households with incomes over
* The 1,400 highest-income taxpayers -- the 1 in 100,000 households with annual incomes over
* Pharmaceutical companies would pay
See chart here (https://www.cbpp.org/research/health/aca-lawsuit-would-cut-taxes-for-the-most-well-off-while-ending-health-coverage-for).
Administration Stance in Lawsuit Would Lead to Billions in Tax Cuts
The lawsuit brought by the state attorneys general (Texas v.
Nonetheless, the Administration took the nearly unprecedented stance of refusing to defend federal law in court. Initially, the Administration urged the courts to strike down the ACA's protections for people with pre-existing health conditions but leave the rest of the law in place. But following a district court decision striking down the entire ACA, the Administration changed its position, arguing to the
Striking down the ACA would end the law's expansion of Medicaid to low-income adults, eliminate the health insurance marketplaces and premium tax credits that help millions of people afford individual market coverage, and end nationwide protections for people with pre-existing health conditions, as well as a range of other coverage expansions and consumer protections.
It would also eliminate the law's revenue measures. This analysis focuses on three such provisions, which together comprise the majority of the revenue that the law raises./3
* Medicare tax on high earners. The ACA imposed a 0.9 percent tax on earnings over
* Medicare Net Investment Income Tax. The ACA also imposed a 3.8 percent tax on unearned income (such as capital gains, dividends, taxable interest, and royalties) for couples with income over
* Pharmaceutical company fee. The ACA imposed a
Lawsuit Would Transfer Income from Low- and Moderate-Income People to High-Income People
The ACA used revenue raised from taxes on high-income people and corporations to help pay for Medicaid expansion to low-income adults and premium tax credits that help moderate-income people afford individual market coverage. (Premium tax credits are available to people with incomes between 100 and 400 percent of the federal poverty line, or about
Striking down the ACA would thus transfer billions of dollars each year from low- and middle-income people (who would lose subsidized health coverage) to high-income households and corporations (which would receive large tax cuts).
* Households with incomes over
* Table 1 compares the value of the tax cuts, total premium tax credits, and federal cost of the ACA coverage provisions by state./6
* Households with incomes over
* Annual tax cuts for this group would average about
See table here (https://www.cbpp.org/research/health/aca-lawsuit-would-cut-taxes-for-the-most-well-off-while-ending-health-coverage-for).
* The highest income 0.001 percent of tax filers -- that is, the 1,409 households with incomes over
* Annual tax cuts for this group would average about
Striking down the ACA would also transfer billions of dollars from seniors to pharmaceutical companies. Eliminating the ACA's branded drug fee would cut taxes for pharmaceutical companies by
See table here (https://www.cbpp.org/research/health/aca-lawsuit-would-cut-taxes-for-the-most-well-off-while-ending-health-coverage-for).
Footnotes:
(1)
(2)
(3) The ACA also included other revenue measures, such as a fee on insurance companies, a tax on high-cost health plans (the "
(4) These and other estimates for high-income households include only the two Medicare taxes; total tax cuts, taking into account other provisions of the ACA, would be slightly larger. Tax-cut estimates are based on Tax Policy Center (TPC) estimates of tax cuts from eliminating the Additional Medicare Tax in 2017 (TPC tables T16-0301 and T16-0302) and the Net Investment Income Tax in 2018 (TPC tables T18-0190 and T18-0191). To estimate tax cuts in 2019, we assume the value of the tax cuts would increase linearly through 2025 (for which estimates are available from TPC tables T16-0303, T16-0304, T16-0311, and T16-0312). While some of these estimates predated the 2017 tax law, that law did not directly alter the two Medicare taxes and does not appear to have significantly affected the taxes' revenue or distributional effect. For example, TPC estimates of the distribution and total effect of the Net Investment Income Tax were similar both before and after the enactment of the 2017 tax law, as are
(5) These are the 37 states where the coverage expansions have the lowest cost. Estimates of how ACA repeal would affect federal spending and coverage in 2019 are from Blumberg et al.
(6) We distribute the Tax Policy Center's estimate of the total tax cuts by state using data from
(7) The
(8) For the methodology behind the top 0.001 percent calculation, see
(9) These estimates are for 2015, when the ACA only partially closed the donut hole, and thus underestimate savings in 2020 (when the hole will be fully closed).
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