Repealing Obamacare wouldn’t just end health coverage for 20 million people. It would also mean a significant tax cut for the wealthiest Americans.
These tax figures are important for understanding why Republicans are so committed to Obamacare repeal. It’s not just about delivering on a campaign promise to get rid of President Obama’s signature legislative accomplishment. It’s also about providing a significant tax cut to the top 1 percent of earners.
The Affordable Care Act includes many new taxes, often levied on the highest-income Americans to help finance the expansion of health coverage for lower-income citizens. This includes a 3.8 percent tax on investment income over a certain threshold, as well as additional payroll taxes on high earners.
The Tax Policy Center, a nonpartisan nonprofit based in Washington that provides analysis of tax issues in policy, finds in a new report that the net effect of Obamacare repeal is a massive tax cut for the rich.
TPC estimates that the top 1 percent of earners would get an average tax cut of $33,000 if Obamacare is repealed — and those in the top 0.1 percent would get an average tax cut of $197,000.
Meanwhile, those who earn less would actually see their taxes, on average, go up. This is because most of the tax subsidies to purchase insurance coverage through the marketplace go to low-income Americans. TPC estimates that, on average, Americans who are in the bottom quarter of earners would see their taxes increase by $90.
This, as TPC notes, masks a lot of variation. “Most low-income households would see no change at all in their taxes,” TPC’s Howard Gleckman writes. “But about 7 percent would get a tax cut of about $1,200 on average while 4 percent would face a very big tax hike, averaging nearly $3,900 — mostly because they’d lose the benefit of the premium subsidies.”
This chart from TPC shows how average incomes would change under ACA repeal. You can see that incomes for low-income Americans (the left half of the chart) go down slightly, while incomes for high-income Americans go up pretty significantly as they face fewer taxes.
You can read the whole TPC report here.