Senate Health Bill Gives Huge Tax Cuts to Businesses, High-Income Households -- Update
June 22 2017 - 4:25PM
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, but in
reverse. Instead of raising taxes to pay for expanded insurance
coverage, it reduces coverage and cuts taxes.
"It's very important that we repeal these taxes as quickly as
possible," said Sen. Pat Toomey (R., Pa.) "These taxes are doing
damage to our economy."
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Like in the House bill, that tax would be repealed as of Jan. 1,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.
Someone who recorded a $1 million capital gain on a stock sale
in January would get a $38,000 tax cut as a result of the bill.
"This specific tax break highlights how the Republicans' bill is
a reward for the fortunate few at the expense of millions of
hardworking Americans," said Sen. Ron Wyden of Oregon, the top
Democrat on the Finance Committee. "By making this tax cut
retroactive, Republicans are being wholly transparent in handing
the elite a massive giveaway."
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.
On the other hand, delaying tax cuts could erode support in the
conservative wing of the party.
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.
Congressional scorekeepers haven't released estimates of the
Senate plan yet and won't do so until early next week. 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 16:10 ET (20:10 GMT)
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