Mar 2, 2017

Why Republicans might means test tax credits

AP file photo

They're still talking about tax credits in the Obamacare replacement plan, thanks to President Trump's "tax credits" shout-out in his Tuesday night speech. But now, Caitlin Owens reports that more Republicans are talking about means testing them, rather than just linking them to people's age. That might cover more people, and it wouldn't waste money on wealthy people the way flat tax credits could — but it would also make it harder to tell the difference between the GOP tax credits and the Obamacare version.

  • It probably would get better coverage estimates from the Congressional Budget Office, since the financial help would be targeted more toward low-income people, according to Stanford University's Lanhee Chen, a member of the Axios board of experts.
  • Most Republicans prefer the flat credits based on age, but "I think the ideal is some hybrid of the two," Chen said.
  • Avik Roy, a conservative health care expert who has written that means-tested credits would be better, says it would avoid the problem of subsidizing wealthier people who don't need the help — and it would prevent a "massive benefit cliff" once people leave Medicaid, which could discourage people from working.
  • But it would start to look more similar to the Obamacare tax credits, which are based on income and indirectly increase with people's age because they're based on the health insurance premiums, according to Larry Levitt of the Kaiser Family Foundation. (One big difference: Obamacare's tax credits also vary by geography.)

Why the change in thinking in Congress? It might "free up some additional dollars" to help "people at the lower end," said Sen. John Thune, a member of the GOP leadership. Even Rep. Mark Walker, the chairman of the conservative Republican Study Committee, likes the idea. More from Caitlin here.

In the meantime, Senate Republicans sure were quiet yesterday after meeting with GOP leaders on Obamacare replacement. About the only senator who didn't dodge reporters afterwards was Tim Scott, and even he said the Republicans have "a long way to go."

Go deeper