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Wealthy Could See a Huge Tax Windfall if Obamacare Is Overturned

Michael Rainey

The lawsuit by 18 state attorneys general seeking to invalidate the Affordable Care Act would provide an enormous tax cut for wealthy households if it succeeds, according to an analysis by the Center on Budget and Policy Priorities published Monday.

Backed by the Trump administration, the suit claims that the ACA became unconstitutional when the Tax Cuts and Jobs Act effectively eliminated the mandate that required all Americans to purchase health insurance, starting this year. If the ACA is overturned, more than 20 million people could lose their health insurance and costs would likely increase significantly for millions more.

But a victory for the plaintiffs would also create financial winners, once the taxes that help fund the ACA are eliminated. Those include an 0.9% Medicare tax and a 3.8% tax on unearned income for households earning more than $250,000, or $200,000 for singles.

Here’s how high-income taxpayers would be affected:

  • Households reporting earnings over $250,000 a year for couples and $200,000 for singles would receive a tax windfall of about $45 billion.
  • Most of the tax reductions would occur in households earning more than $1 million per year.
  • The top 0.001% – 1,400 households with incomes above $53 million – would receive an average tax cut of $2.7 million, worth about $3.8 billion altogether.

Pharmaceutical firms would also be big winners, with the elimination of $2.8 billion in fees based on the sale of brand-name drugs.

Overall, the ACA lawsuit could have strongly regressive consequences. “In effect”, CBPP said, “the Administration and the state attorneys general are seeking a massive transfer of income from low- and moderate-income Americans to people on the top rungs of the income ladder.”

What’s next: A decision in the lawsuit could come as soon as this month, though the result would likely face appeals that could keep it in the courts for months. Seema Verma of the Centers for Medicare & Medicaid Services recently said that the Trump administration wouldn’t allow millions to lose their health coverage, claiming that the White House had a plan to deal with the situation if the ACA is overturned – though she refused to provide any details about the plan to a congressional committee.


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