Unsettling Scores (Mar. 13)

Update 168:  Unsettling Scores

The Tax Take on CBO’s AHCA Report

The eagerly awaited CBO report on the GOP’s healthcare replacement plan released this afternoon set out what would be talking points, or rallying cries, for Democratic candidates and causes in the 2018 midterms.  As most serious analysts predicted, the American Health Care Act is officially projected to rid 24 million Americans of their insurance coverage by 2024 — damning if not fatal.

The AHCA bill has always offered some very sizable targets to critics, which this CBO score confirms: the catastrophic impact on coverage (14 million people losing coverage in the first year, rising to 24 million over 10 years), no long-term plan for improving affordability in terms of cost, and the tax piece, which we will explore here today.

Best,

Dana

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Tax Cuts and Tax Credits

The CBO report quantifies precisely how regressive the GOP healthcare plan is.  Nancy Pelosi put it best at her press her press conference following the release of the report:

“It will be the biggest transfer of wealth from low and middle income people to wealthy people in our country. It couldn’t be worse.”

The GOP plan gives $275 billion back to  to the top two percent, while putting the weight of the American healthcare system on the middle class, even while more than doubling the number of uninsured Americans.

Big-Ticket Break

The bill totals an estimated revenue cost of $600-700 billion in tax cuts for the wealthy by 2027.  The components include repeal of the investment tax, reducing federal revenue by $157.6 billion over 10-years, as well as of the wage tax, costing 117.3 billion.

As House Speaker Paul Ryan has argued over the past week, this plan revolves around tax credits.  But when Republicans tout the tax care plan, they tend not to mention the regressive consequences for middle-class Americans. A given credit for top earners is worth more than twice as much in assistance as the same credit for a low-income taxpayer.

The tax cuts compared to tax credits come in at almost a 2:1 ratio in dollar terms, as we will see $600-700 billion in tax cuts and only $361 billion in tax credits for health insurance purchases. Most of those cuts or savings (60 percent of these cuts go to those earning more than $1 million a year.

According to the Tax Policy Center, the GOP healthcare plan benefits the wealthy at five times the rate that it does middle class Americans.  Net-net, the middle class will be spending more on their health insurance from their incomes, even with the aid of tax credits.

Ryan’s Choice

The CBO is as respected a federal institutional as there is and the neutral Switzerland on the tumultuous stage of federal politics in Washington.  To question it is to put one’s own credibility in jeopardy.  Nevertheless, the Trump administration persisted again today, challenging the critical [Apgar] score of Ryan’s baby. Per Tom Price:

“This report confirms that the American Health Care Act will lower premiums and improve access to quality, affordable care. CBO also finds that this legislation will provide massive tax relief, dramatically reduce the deficit, and make the most fundamental entitlement reform in more than a generation.”

Ryan may be embracing the CBO report for public institutional and constitutional reasons.  24 million people losing coverage in under a decade largely enabled by returning money to the rich through tax cuts —one of these things does not belong.  As a result, Ryan is now faced with a choice:

  •  push forward with the bill as-is, tilting at windmills so he can return home and tell everyone he did his best, but the Senate is broken and the Democrats are obstructionists

or

  •  eat crow and take the AHCA bill back to the drafting table in the House and open up the process to work with others and find a compromise so the reform can actually move forward.

We’ll know what he chooses (and then, presumably, will also have a better understanding of the ultimate purpose of his bill) by watching the tax cuts vs. tax credits ratio in the bill as it gets finalized.

Can  Ryan to save the AHCA? 

The litmus test for his next move: the 2:1 tax cuts to tax credits ratio. We do not need to be giving money to the rich as a thank-you token for their previous funding of the ACA.  The credits, as-is, are a severely regressive method for distributive subsidies or benefits of any kind. A credit for top earners is worth more than twice as much in assistance as the same credit for a low-income taxpayer. If Ryan can turn this ratio around, it will show he’s really invested in reforming health care, not just proving a point by handing out tax cuts.

In any case, for now, the bill is dead-on-arrival in the Senate. There are already four GOP senators who oppose it. If the bill is left as is, it has no chance of becoming law.

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