Every tax cut in the Senate GOP health care bill, cartoonsplained

The Senate Republicans’ health care bill cuts government programs that help low- and middle-income Americans get health insurance.

It takes away coverage from low-income Americans by phasing out Medicaid expansion, and it drastically cuts the subsidies the federal government gives to middle-income people so they can afford health insurance. These are two major provisions under the Affordable Care Act, which is current law.

But Republicans argue that cutting these programs will save a massive amount of money — about $1.2 trillion over the next 10 years, according to the Congressional Budget Office.

Some of the savings will go to reduce the budget deficit. But most of it pays for tax cuts, which Republicans argue will create economic growth, encourage market competition, and put more money in the pockets of Americans.

So what exactly are each of these tax cuts, and who do they benefit?

Here’s an overview chart:

Let’s break this down a bit.

The tax cuts that help high earners

Senate Republicans want to cut two taxes that apply only to high earners.

Everyone who earns wage income pays the regular Medicare tax of 2.9 percent, and that will stay intact.

But to subsidize health care for low- and middle-income people, the Affordable Care Act added a 0.9 percent payroll tax surcharge for wages above $200,000 for individuals and $250,000 for couples.

But many rich people earn most of their income through investments, which is money earned from things like selling stocks, earning interest on investments, or getting paid dividends. And before the Affordable Care Act, this income was not subject to that 2.9 percent payroll tax.

So the ACA added a tax that made wealthy investors share the burden with workers.

The law added a 3.8 percent tax on investment income, but it only kicks in for individuals making $200,000 or more and couples making $250,000 or more. (Some senators have recently expressed support for leaving the investment tax in place.)

Put together, these two provision means that high earners’ income faces a 3.8 percent Medicare tax — no matter where it comes from.

The Senate Republicans’ bill wants to repeal these taxes, which would cost the federal government $231 billion over the next 10 years, according to the Joint Committee on Taxation.

So remember that big pile of money above, which Republicans saved from phasing out Medicaid expansion and subsidies, which help low- and middle-income people get coverage?

A huge portion of that goes toward tax cuts for these high earners.

The tax cuts for the medical industry

The Affordable Care Act imposed a lot of new regulations on insurers. But by giving health coverage to millions of people, it also created new customers for insurers — and, in turn, for manufacturers of things like prescription drugs and medical devices.

In exchange for that, it imposed a number of new taxes on these medical industries.

The Senate Republicans’ bill cuts these taxes.

The biggest is a fee paid by insurers, divvied up across insurance companies based on the total amount of premiums they each collect.

The ACA also imposes a tax on manufacturers of brand-name pharmaceutical drugs that are sold to government programs like Medicare and Medicaid, to recoup some of the added cost that comes with brand name products.

There's also a 2.3 percent excise tax on medical devices like pacemakers (but excluding common goods like eyeglasses, hearing aids, or wheelchairs), and a tax on tanning salons meant to both raise revenue and promote public health by discouraging tanning (which can lead to skin cancer.)

Every major health bill put forward by Republican leadership in Congress in 2017 has repealed all these taxes.

Some of these taxes may have been passed onto consumers, so it's possible that some costs will go down if these taxes are repealed. But it's also likely that companies will pocket some of the savings.

The plan to reduce tax breaks for health care

The Affordable Care Act also tried to control health costs and shift costs to high earners through changes to how the tax code treats health care spending.

The first is a tax on generous health insurance plans offered by employers, often called the "Cadillac tax." Because health insurance isn't taxed by payroll or income tax, companies often choose to offer lower wages and give out more of their compensation in the form of generous health coverage. That drives down wages and drives up health care tax. The Cadillac tax is meant to partially correct for this problem.

Many people on both the left and right oppose the tax (especially unions that have bargained for generous health plans for their members), and it’s already been delayed to 2020. Republican health bills would delay it further to 2026.

The ACA included a number of other changes, like an increase in the amount of medical expenses one must have to deduct them from income and tweaks to Health Savings Accounts and Flexible Savings Accounts (for example, reducing contribution limits and banning them from being used to pay for over the counter drugs).

The Republican bills would reverse those changes as well, which would predominantly help wealthy people who itemize their taxes and use HSAs and FSAs.

The GOP bill wouldn’t penalize people for not buying health insurance — this has an impact on revenue

The ACA also penalized employers who didn't offer the required coverage, and penalized people who were uninsured. The Senate Republicans’ bill doesn't impose those requirements, and so loses out on any revenue they bring in. Then again, it also saves money because the absence of an individual mandate leads fewer people to use Medicaid or insurance subsidies and results in a big loss in coverage.

Ultimately, these coverage losses pay for tax cuts for the wealthy

The ACA created new taxes on high earners and the medical industry to subsidize health care coverage for low- and middle-income Americans. So repealing would reverse that process and shift the burden back onto those who have trouble affording health insurance.

Because of that, the latest Senate bill would cause 22 million more people to be uninsured by 2026, according to the Congressional Budget Office.

A large part of that is because Medicaid expansion would be phased out, which leaves very low-income people without coverage. In addition, low- and middle-income Americans who receive subsidies to buy insurance would face higher premiums — and get worse coverage for it. So many people would just stop buying insurance.

For example, here’s how much premiums would rise by 2026 for those earning $26,500:

And here’s how much premiums would rise by 2026 for those earning $56,800:

Republicans argue that this bill puts money back in the pockets of Americans to the tune of almost $550 billion, while reducing the budget deficit by about $320 billion.

But the cuts disproportionately affect the poor, while the tax cuts largely benefit wealthy. This ultimately means more money is flowing back to the top.

Explanatory journalism is a public good

At Vox, we believe that everyone deserves access to information that helps them understand and shape the world they live in. That's why we keep our work free. Support our mission and help keep Vox free for all by making a financial contribution to Vox today.

One-Time Monthly Annual

$95/year

$120/year

$250/year

$350/year

Other

$

Yes, I'll give $120/year

Yes, I'll give $120/year

We accept credit card, Apple Pay, and Google Pay. You can also contribute via