Dumping Obamacare’s taxes would lead to savings of $33,000 for high earners but could raise taxes for lower-income households, a new analysis found.
The analysis released Thursday from the Tax Policy Center, a joint venture from center-left think tank Urban Institute and nonpartisan Brookings Institution, comes as Congress and President-elect Trump vow to repeal Obamacare next month.
Repealing all of the law’s taxes would cut taxes by an average of $180 per household next year, the Tax Policy Center said. However, any Obamacare repeal without a replacement could lead more than 29 million losing insurance coverage and putting them at risk for high medical costs.
Republicans are discussing repealing the law through a budgetary move called reconciliation that requires only a simple majority rather than 60 votes to pass. Republicans would give themselves a few years to craft and approve a replacement plan, although no timetable has been set.
In addition to the law’s employer and individual mandates for providing insurance coverage, Obamacare includes taxes on health insurers and on employers for high-cost health plans.
It also created two extra taxes aimed at high-income Americans: a 0.9 percent surtax on earnings and a 3.8 percent tax on net investment for people making more than $200,000 a year, the Urban Institute said.
Repealing those taxes and the rest of Obamacare would give nearly everyone in the top 1 percent of income an average tax cut of $33,000, the study found.
“Those in the top 0.1 percent would get an average tax cut of about $197,000, raising their after-tax incomes by 2.6 percent, thanks to the repeal of the net investment tax and the extra Medicare tax,” according to a blog post from Howard Gleckman, a senior fellow at the center.
Meanwhile, middle-income households that make between $52,000 and $89,000 would get an average tax increase of $80.
About 94 percent would get a small tax cut of about $110, but 3 percent would be hit with a tax increase averaging $6,200 that reflects the loss of the law’s insurance subsidies for paying down healthcare coverage, Gleckman said.
The analysis found that repealing the premium subsidies and coverage penalties would mostly hurt people in the lowest, 40 percent income bracket who make $52,000 or less.
The analysis doesn’t take into account the impact of any replacement plan for Obamacare. Congress’ current plan is to repeal Obamacare but leave it intact for a few years while it creates a replacement to help reserve and expand coverage.
It is not clear what that replacement plan will be, although Republicans have floated conservative ideas such as letting insurers buy plans across state lines and transforming Medicaid into a block grant program to cut costs.
