The Senate Finance Committee announced today that it would add to the Senate tax reform bill a zeroing out of Obamacare’s individual mandate surtax, in essence repealing the mandate. This is a big tax cut aimed squarely at America’s middle class.
The mandate is a tax which punishes those who can least afford it
Obamacare’s individual mandate is enforced by the collection of a surtax on income. Failure to purchase Obamacare insurance triggers the surtax.
In 2017, the surtax is equal to the greater of:
- 2.5 percent of adjusted gross income, or
- the dollar penalty
The dollar penalty is $695 for every adult in the household, plus $347.50 for every child in the household, with a household maximum of $2085.
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Repealing Obamacare’s individual mandate might not be the devastating blow to health insurance markets that supporters of the law fear.
Because the tax penalty for not having insurance is far less costly than what many Americans would have to pay for coverage, many have chosen to take the fine. Eliminating it, therefore, might not radically change behavior — or fulfill the dire predictions of spiking premiums and vast increases in uninsured people that economists, health providers and politicians once predicted.
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Senate Republicans have included a repeal of Obamacare’s individual mandate in the latest version of their tax reform bill. Some Democrats have reacted by claiming that the repeal of the mandate is actually a tax increase, and that mandate repeal “kicks” people off coverage they didn’t want to buy. Welcome to 2017.
The “mandate repeal is a tax hike” argument seems ludicrous on its face. Why would repealing a tax—the fine that you pay if you find Obamacare’s coverage unaffordable—represent a tax increase?
The “tax hike” talking point comes from two tables supplied today by the Joint Committee on Taxation, the Congressional agency that estimates the fiscal impact of tax legislation. (Its work is often mistakenly credited to the Congressional Budget Office, which also relies on JCT work for tax policy.)
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Republicans are right to want to repeal the mandate that fines Americans who don’t buy health insurance. Their dual motive is to repeal the most loathed part of the Affordable Care Act as well as to make tax reform comply with the Senate Byrd Rule that dictates no deficits outside a 10-year budget window. Some Americans no doubt would decide not to buy insurance if they aren’t hit with a tax, but that would be their choice. Republicans aren’t denying them anything. No other ObamaCare rule or mandate would be changed, and no benefit formula would be altered. Anyone who still wants an ObamaCare policy could still buy it.
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As Republicans and the Trump administration continue trying to chip away at the Affordable Care Act, the Internal Revenue Service has begun, for the first time, to enforce one of the law’s most polarizing provisions: the employer mandate.
Thousands of businesses — many of them small or midsize — will soon receive a letter saying that they owe the government money because they failed to offer their workers qualifying health insurance. The first round of notices, which the I.R.S. began sending late last month, are being mailed to companies that have at least 100 full-time employees and ran afoul of the law in 2015, the year that the mandate took effect.
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Senate Republicans have added the repeal of Obamacare’s individual mandate to the latest version of their tax bill, with several key swing votes saying they’re open to the idea.
Late on Tuesday, the chairman of the Senate Finance Committee, Orrin Hatch of Utah, released a new bill that would eliminate the mandate’s fines beginning in 2019. The addition was discussed at a closed-door party lunch meeting earlier in the day, and several Republican senators said no one spoke out publicly against repealing the mandate.
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Last night, Sen. Orrin Hatch (Utah) announced that the Senate Republican tax reform bill would include a repeal of Obamacare’s individual mandate. Why is this a big deal? It all goes back to the profound impact of Congress’ official fiscal scorekeeper, the Congressional Budget Office.
The single most important reason that Republicans failed to replace Obamacare in 2017 is because of estimates by the Congressional Budget Office that 22 million fewer people would have health insurance in 2026 under the GOP bills.
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The tax-reform bill that Senate Republicans are releasing Thursday does not repeal ObamaCare’s individual insurance mandate, though the provision could be added down the line, GOP senators said.
Senators leaving a briefing about the legislation said repealing the mandate is not in the initial text of the legislation, but cautioned that the issue is still under discussion.
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If you were deliberately trying to design the most arbitrary, painful and pointless tax possible, how would you go about it?
First, you would structure it to inflate the cost of an essential product. Then, you’d create exemptions so vast that only 5% of taxpayers were subject to it. You might even ensure that it hit people only when they were particularly vulnerable—like when they’d lost a job. Finally, you would use it to drive enrollment in entitlements, so that it increased the federal deficit by $338 billion.
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Republicans in Congress are plowing ahead on tax reform, and one obstacle is the complexity of Senate budget rules that limit how much taxes can be cut. The good news is that for once Washington’s fiscal fictions could be deployed to improve policy by repealing ObamaCare’s individual mandate as part of tax reform.
The Senate Finance Committee on Thursday released the details of its tax proposal, which includes a permanent 20% corporate rate and more. Senators Pat Toomey and Bob Corker cut a budget deal to allow for $1.5 trillion in net tax cuts over 10 years without accounting for faster economic growth (and more revenues) as a result of reform.
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