TROJ.HORSE ( T*he *R*eal *O*bject and *J*ive of the *H*ealth *Or *R*use/*S*ham *E*xercise)- Tax Cuts Email Print

The mystery of the unyielding rush to steamroll this bill through the House, without any public hearings, is revealed in the ultimate purpose of the bill.  Not to give Americans better health coverage. Not to make the insurance market more rational. Goal #1, of the American Health Care Act (AHCA) is to pull in much lower revenue, and cut taxes for the richest Americans. It is a Trojan Horse for the enormous tax cut.

The multitude of taxes that the substitute plan will lop off amounts to about $ 1 Trillion over a 10-yr period, through 2026 -- or $890B to be more precise. That's according to the Congressional Budget Office (CBO) scoring.

That huge revenue loss is why there's simply not enough funding to give adequate coverage to subscribers, though tax credits or subsidies.  The tax credit thresholds will fall far, far short of what's needed to purchase insurance for low- or moderate-income subscribers in the individual market. For people of modest means the tax credits are generally much lower than in the Affordable Care Act, aka Obamacare.

Before the CBO scoring, there was a preliminary scoring released on March 7 by the Joint Committee of Taxation (JCT), reporting to senators and representatives. Although it was preliminary to the CBO score and less comprehensive, its figures, as summarized in a table by the Committee for a Responsible Federal Budget (CRFB), give a good visualization of lots of the components of the loss of revenue that has been paying for citizens' premium support up to now.

This JCT tax-cut impact is in line with the CBO scoring -- but CBO also shows additional tax losses, of $290 B, with most of that being the penalties ($210 B) levied on employers not carrying insurance and uninsured persons.

With that difference accounted for you get very close to the $890 CBO total revenue shortfall.

That's how the bill comes up way short in resources to fund premium support or Medicaid expansion.  So the bill's writers cuts back even more than $1T in Medicaid reimbursement and tax credits to subscribers.

With the draconian cutback (translates to higher premium payments by you), Paul Ryan and Trump get to crow that the federal budget deficit will be smaller.  Yes, the budget deficit will be smaller.  Even tax payments to the Medicare trust fund ("HI surtax" or Medicare surtax) will be reduced by $117 over 10 years -- providing less of a financial boost to that fund's solvency.

For the budget strategy, there's a clever trick that Congressional budget writers wrote into the budget resolution they passed on January 13 -- and that resolution reveals plainly why Paul Ryan is determined, even desperate, to pass this health care bill, with its built-in tax cut.

In the Jan 13th budget resolution, the health care repeal-and-replace bill was the only budget legislation that got a special exemption from the regular PAYGO (pay as you go) rules of order.  

That means that when they write the legislation to lose revenue, they are not forced to find any offset to regain the revenue they give up.  That's why the Health Care bill is of such high value to Paul Ryan and Donald Trump.  It is the means and end to a tax cut aimed mostly at the highest earning Americans.

Hence, the desperate need by the GOP to use the Health Care act to slide in tax cuts.  

Jonathan Chait wrote about it in New York Magazine last month, in "Paul Ryan's Dream of Tax Cuts for the Rich Will Not Be Denied."

The need for tax cuts is why the support for insurance access is underfunded.  It's not a bug, it's a feature. A fat $890B tax loss feature.  It resets lower the tax baseline for the upcoming tax reform effort.


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