Obamacare Repeal Seen as Tax Cut for Top 1%, Raise for Others

  • Highest earners would get average cut of $33,000, study says
  • Finding may complicate Mnuchin’s vow of no tax cut for rich

Pedro Rojas holds a sign directing people to an insurance company where they can sign up for the Affordable Care Act, also known as Obamacare, before the February 15th deadline on February 5, 2015 in Miami, Florida.

Photo by Joe Raedle/Getty Images

Repealing Obamacare would amount to a tax cut for the wealthiest Americans and a modest tax hike for some of the lowest earners, a new study found.

If the law were eliminated, as President-elect Donald Trump and members of Congress have pledged to do, the top 1 percent of earners would see an average tax cut of $33,000, while the top 0.1 percent would enjoy an average tax break of $197,000, the Tax Policy Center found. The non-partisan group is a joint venture of the Urban Institute and the Brookings Institution.

Meanwhile, the lowest-income households, which make less than $25,000, would see their tax bills increase on average by $90 under a full repeal. But that average masks a wide variation -- most low-income households would see no change, researchers found, and 7 percent of them would get an average tax cut of about $1,200. But 4 percent would see a tax increase averaging almost $3,900.

The Tax Policy Center’s Howard Gleckman concluded that “in general, repealing the health reform law would, on average, cut taxes for the rich and raise them for low-income households.” The projected tax hike for some people is due to the fact that repealing the law would undo its subsidies to buy insurance coverage, which are delivered in part through tax credits.

The findings complicate Trump’s promises to focus on middle-class tax relief. His adviser and choice for Treasury Secretary, Steven Mnuchin, said two weeks ago he wants “no absolute tax cut for the upper class.” The tax plan that Trump proposed in the campaign cuts taxes across the board, but especially for high earners, according to independent analyses.

Trump’s transition team didn’t immediately respond to an e-mailed request for comment.

The 2010 Affordable Care Act imposed a Medicare surtax and a net investment tax on wealthier households, as well as a tax on costly so-called “Cadillac” health plans. The purpose was to finance an expensive expansion of subsidized health insurance, under which about 22 million people gained coverage, without raising the deficit.

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