The long-awaited Obamacare replacement plan from Senate Republicans wouldn’t do much to preserve coverage for millions of poor and working-class people, but it would deliver tax cuts to the wealthiest Americans.
To appeal to their moderate members, GOP leaders initially faced pressure to maintain some of the Obamacare taxes that funded expanded Medicaid coverage. Instead, the Senate version mirrors the House bill in seeking to repeal almost all of the Obamacare taxes, which largely affect the highest earners.
The draft repeals retroactively a 3.8 percent tax on net investment income for individuals with incomes above $200,000 or couples above $250,000 -- effective Dec. It also scraps a 0.9 percent Medicare surtax on wages above those thresholds after 2022.
“What Republicans are doing is using health-care reform as a way to push through tax cuts for high-income households,” said William Gale, a senior fellow and tax expert at the nonpartisan Brookings Institution.
Orrin Hatch, chairman of the tax-writing Senate Finance Committee applauded the bill for getting rid of taxes he has said are harmful to the economy. Senate Majority Leader Mitch McConnell characterized the Obamacare taxes as costs that had been passed to consumers and said there would be pressure to reduce premiums thanks to their elimination.
Working Americans
Meanwhile, Democrats used the tax cuts to attack the bill as helping the rich to get richer at the expense of working Americans.
“The Senate bill, unveiled today, is not a health-care bill. It’s a massive transfer of wealth from middle-class and poor families to the richest people in America,” former President Barack Obama wrote in a Facebook post. “It hands enormous tax cuts to the rich and to the drug and insurance industries, paid for by cutting health care for everybody else.”
Democratic leaders, such as Representative Richard Neal, the Massachusetts Democrat on the Ways and Means Committee, have said they’ll zero in on upper-income breaks pitched by Trump and House leaders as part of a tax overhaul to make it politically difficult for Republicans to support them. Trump campaigned on the promise to fight for working Americans and provide a tax cut for the middle class.
“This bill has nothing to do with health care,” Senator Bernie Sanders of Vermont, the runner-up for the 2016 Democratic presidential nomination, said in a statement. “It has everything to do with an enormous transfer of wealth from working people to the richest Americans.”
CBO Score
The Senate draft bill also echoed the House version in delaying the so-called Cadillac tax on high-cost insurance plans from 2020 to 2026. That would help the bill’s revenue score when it’s evaluated by the Congressional Budget Office, helping it meet congressional rules that would allow its passage in the Senate with no Democrats’ votes. The nonpartisan budget office said Thursday it plans to release a score for the Senate bill early next week.
The elimination of Obamacare taxes in the House version of the bill would add $664 billion to the federal deficit over a decade, according to previous estimates by the CBO.
The anti-tax activist Grover Norquist released a statement saying the Senate bill was abolishing Obamacare taxes on the middle class, such as the individual mandate penalty for buying insurance. Under the Affordable Care Act, “taxes increased. Health care costs increased. Obamacare failed,” Norquist said.
The Senate draft legislation also axes a tax on health insurers and, beginning in 2018, a 2.3 percent tax on medical device sales that Congress suspended in 2015. Industry groups have waged aggressive campaigns in recent years to remove both. An indoor tanning tax would be scrapped starting in October 2017.
In passing Obamacare, Democrats imposed about a trillion dollars in tax hikes over a decade to finance insurance coverage for about 20 million people, the government estimates, largely through a Medicaid expansion and premium subsidies. The tax hikes were a focus of Republican ire during the 2009 to 2010 debate over health care, and the GOP has pushed for seven years to repeal them, along with the coverage subsidies they helped finance for low- and middle-income Americans.
‘Mean, Heartless’
Senate Democratic Leader Chuck Schumer called the Senate Republican bill “mean” and “heartless” toward millions of Americans who stand to lose their health insurance.
“Why are they doing all of this? To provide a giant tax break to the wealthiest Americans. Simply put, the bill will result in higher costs, less care,” Schumer said Thursday at a press conference. “Every American should be asking their Republican senators one simple question this weekend: Why did the wealthy deserve a tax cut more than we deserve health care?”
The Senate Republican bill hit an early obstacle as a quartet of Republican senators -- Rand Paul of Kentucky, Mike Lee of Utah, Ron Johnson of Wisconsin and Ted Cruz of Texas -- said in a joint statement that they weren’t ready to vote for it, arguing that it doesn’t fully repeal Obamacare or sufficiently lower costs for Americans.
More moderate Republicans voiced other concerns about the draft legislation, such as the defunding of Planned Parenthood.
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