ACA Repeal Could Cost at Least $594 Billion: Joint Tax Panel

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By Laura Davison

Repealing the tax provisions funding the Affordable Care Act will cost the government at least $593.7 billion over the next decade, according to the Joint Committee on Taxation.

That figure doesn’t include the revenue loss from several provisions, including funds tied to repealing the individual and employer mandates to buy health coverage. Those revenue scores will come from the Congressional Budget Office, which hasn’t yet released those numbers or the cost of the House Republican plan to replace the health care law. The House Ways and Means and Energy and Commerce committees are scheduled to mark up the replacement legislation March 8.

Democrats are criticizing House leadership for going ahead with legislation without knowing how much it will cost. Minority Leader Nancy Pelosi (D-Calif.) said in March 7 statement, “Members must not be asked to vote on this legislation before the CBO and the Joint Committee on Taxation have answered the following questions about your legislation in 2018 and 2019, over the 10-year budget window, and in the decade after: How will this bill measure up to the Affordable Care Act and current Medicaid law on coverage, quality, and cost? And how will it impact Medicare solvency?”

High-Earner Taxes

Repealing the net investment income tax (NIIT), which will cost $157.6 billion, is one the largest revenue losers in the plan to repeal the health care law. The 3.8 percent tax on investment income for wealthy individuals has raised more money than the JCT originally expected.

Some of the revenue losses from the tax’s repeal are less than previous projections about what the tax would raise. Original JCT scores of the tax, from 2010 (JCX-17-10), grouped the figures with the 0.9 percent additional Medicare tax for high earners.

The 2010 scores projected that those two taxes would raise $38.5 billion in 2019, but the repeal scores show that the loss to the government would be only $17.6 billion that year. Not until 2025 would the loss reach roughly $38.2 billion.

“That is surprising considering that the government seemed to be collecting net investment income tax revenues in excess of the JCT projections,” said David H. Kirk, a former IRS official who helped write the NIIT rules, said. Kirk is now national tax partner at Ernst & Young LLP and has written a portfolio on the regulations for Bloomberg BNA.

Estimates that come in lower than some previous projections are advantageous to Republicans, as they seek to limit the amount of revenue they need to raise to offset the loss from repealing the taxes funding Obamacare.

The JCT broke out the estimates for the repeal of the tax provisions into several documents: the deduction for highly paid employees ( JCX-6-17), the tanning tax ( JCX-8-17), the fee on insurance providers and branded pharmaceuticals ( JCX-10-17), the net investment income tax ( JCX-12-17), and several other provisions including the medical device tax and the “Cadillac tax” on high-cost health plans ( JCX-16-17).

To contact the reporter on this story: Laura Davison in Washington at LDavison@bna.com

To contact the editor responsible for this story: Meg Shreve at MShreve@bna.com

For More Information

JCX-6-17 is at http://src.bna.com/mMr.

JCX-8-17 is at http://src.bna.com/mMs.

JCX-10-17 is at http://src.bna.com/mMt.

JCX-12-17 is at http://src.bna.com/mMu.

JCX-16-17 is at http://src.bna.com/mMv.

Highlights of Tax Provisions Repealed in Health Care Bill
TAX TO BE REPEALEDCOSTREPEAL DATEJCT DOCUMENT
Net investment income tax: 3.8 percent tax on investments for high-earning taxpayers $157.6 billion2018JCX-12-17
Fee on health insurance providers: Annual fee for entities providing coverage $144.7 billionWouldn't apply starting in 2017JCX-10-17
Medicare tax increase: Tax of 0.9 percent on earned income greater than $200,000 for individuals/$250,000 for a couple $117.3 billionWas set to begin in 2018, repealedJCX-16-17
“Cadillac tax”: Surcharge on high-cost health plans $48.7 billionRepealed for 2016 through Jan. 1, 2025 (applies for taxable periods after Dec. 31, 2024) JCX-16-17
Higher medical expense deduction threshold: 10 percent threshold for elderly taxpayers and for alternative minimum tax purposes $34.9 billionLowers floor to 7.5 percent in 2017 for elderly taxpayers, 2018 for AMT filers.JCX-16-17
Annual fee on branded prescriptions: Applies to manufacturers and importers $24.8 billionDec. 31, 2017JCX-10-17
Medical device tax: 2.3 percent excise tax on manufacturers and importers $19.6 billionDec. 31, 2017JCX-16-17
Limitation on health flexible spending arrangements: Applies to cafeteria plans $18.6 billionDec. 31, 2017JCX-16-17
Tax increase on health savings accounts: Maximum contribution limit to HSA increased to amount of deductible and out-of-pocket limitation $18.6 billionRepeal effective on distributions after Dec. 31, 2017JCX-16-17
Over-the-counter medication exclusion: Nonprescribed over-the-counter medicines not permitted as medical expenses for HSAs $5.5 billionDec. 31, 2017JCX-16-17
Tanning tax: 10 percent tax on retail tanning services $600 million2018JCX-6-17
Deduction for high-paid employees: $500,000 cap on wage deduction for health insurance executives $400 millionDec. 31, 2017JCX-6-17

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