Senate Health Bill Gives Huge Tax Cuts to Businesses, High-Income Households
June 22 2017 - 1:34PM
Dow Jones News
By Richard Rubin
WASHINGTON -- The Senate's health-care bill repeals hundreds of
billions of dollars in taxes on businesses and high-income
households and includes a retroactive cut in capital-gains
taxes.
The tax portions of the proposal, a draft of which was released
on Thursday in advance of a possible vote next week, are very
similar to the elements in the version the House passed last month.
The plan operates like the 2010 Affordable Care Act in reverse.
Instead of raising taxes to pay for expanded insurance coverage, it
reduces coverage and cuts taxes.
The taxes it would remove were created to pay for Obamacare. The
most notable is a 3.8% tax on investment income, including capital
gains and dividends. The tax only applies to individuals with
incomes exceeding $200,000 and married couples making more than
$250,000.
Like in the House bill, that tax would be repealed as of Jan. 1,
2017, dropping the top capital-gains tax rate to 20% from 23.8%.
Under that measure, people who sold assets earlier this year, even
before they knew if the tax cut would happen, would benefit.
Retroactive tax cuts like this don't create an incentive and can
yield windfall gains for people who already made decisions.
Senators had discussed delaying some of the tax cuts, which
would create budgetary room in the bill to pay for health-insurance
coverage. This draft doesn't do much of that, but it allows
Republicans to find money over the next week by proposing delays,
which could pay for changes that could win over wavering
senators.
Capital gains and other investment income are concentrated at
the top of the income distribution. More than 60% of that tax cut
would go to the top 0.1% of the population, according to the Tax
Policy Center, a project of the Urban Institute and Brookings
Institution.
A separate 0.9% payroll tax, which also only applies to
high-income households, would remain in place until 2023, just as
in the House bill.
Republicans say Obamacare's taxes have harmed the economy, and
they have promised to repeal them all, rather than leave some in
place to pay for health coverage.
Democrats blasted the plan and have been saying for weeks that
the GOP's plans were largely designed to cut taxes and not improve
health care.
"This bill has nothing to do with health care," Sen. Bernie
Sanders of Vermont said in a statement. "It has everything to do
with an enormous transfer of wealth from working people to the
richest Americans."
Congressional scorekeepers haven't released estimates of the
Senate plan yet. The House bill included $663 billion in tax cuts
over a decade, plus hundreds of billions of dollars more in lower
taxes embedded in health-insurance provisions.
The proposal would repeal other taxes created as part of
Obamacare, some of which reach beyond high-income households. They
include a tax on indoor tanning, limits on contributions to
flexible-spending accounts, higher limits on deductible medical
expenses, taxes on pharmaceutical companies and health insurance
premiums and an excise tax on medical devices.
The plan would also repeal, starting in 2017, a rule that
prevents health-insurance companies from deducting more than
$500,000 for the compensation of their top executives.
The so-called Cadillac tax on high-cost employer-sponsored
health insurance wouldn't take effect until 2026. Keeping that tax
in place in the future would help the bill comply with Senate rules
that forbid the legislation from increasing budget deficits beyond
the 10-year budget-scoring window.
Write to Richard Rubin at richard.rubin@wsj.com
(END) Dow Jones Newswires
June 22, 2017 13:19 ET (17:19 GMT)
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