Caitlin Owens

Higher premiums would cancel out some tax cuts

Some people's tax cuts under the GOP Senate bill would be canceled out by the increased premiums they would face due to the repeal of the Affordable Care Act's individual mandate, according to an analysis by The Commonwealth Fund. And, for those roughly 7 million people who buy insurance on their own but don't get premium subsidies, high health care costs would endure even after the bill's tax cuts expire.

Data: The Commonwealth Fund; Chart: Lazaro Gamio / Axios

Why this matters: This is the downside of repealing the individual mandate in the tax bill. Although doing so provides savings to help pay for the bill's tax cuts, on balance, the bill would leave millions of middle-income Americans worse off financially.


Individual mandate is important, but underperforming

Experts almost universally agree repealing the individual mandate is bad for the marketplace. Photo: Carolyn Kaster/AP

Experts across the political spectrum generally agree that the Affordable Care Act's individual mandate is both necessary for market stability, and probably not working as well as its authors intended.

The bottom line: Almost everyone agrees that repealing the mandate now, without a replacement, will make insurance markets function substantially worse than they are today. But many experts believe other policies might be just as effective, if not more so, at getting healthy people into the system and thus moderating premium increases.

While there's disagreement about how effective the mandate has been, most people I talked to acknowledge that it's not working as well as originally intended, and some conservative health wonks think there are more effective ways of getting more young, healthy people into the market.
  • "There is real uncertainty about the precise magnitude of the effects of repealing the mandate—as there is about almost any change in public policy—but little uncertainty that doing so would result in many more uninsured and a worse health care system," said Matt Fielder of the Brookings Institution.
  • "The mandate wasn't very strictly enforced, the penalty is pretty low by most people's standards, and it comes a year after dropping coverage, if it comes," Joe Antos of the American Enterprise Institute told me.
  • "Putting aside whether the mandate is actually effective, insurers think it is effective—and in many ways that's what counts. If insurers think it's effective, then they won't jack up premiums—which means it is effective," the Center for American Progress Topher Spiro said.
  • Potential alternatives include auto-enrolling people into coverage, imposing a penalty on those who don't have continuous coverage when they sign up, creating a federal reinsurance pool to offset the cost of sick enrollees, increasing the mandate penalty.
What we know about the mandate's effectiveness:
  • Enrollment through the ACA's exchanges has been lower than predicted. There are many potential reasons for this, but the mandate being a weak incentive is one.
  • S&P Global estimated last week that repealing the mandate would result in 3 to 5 million more uninsured people than the status quo — a far cry from the 13 million predicted by the Congressional Budget Office.
  • Yet, as Brookings' Matt Fiedler points out, the uninsured rate among people who are too wealthy for the ACA's premium subsidies fell by around one-third as the ACA took effect. "That trend is very hard to explain unless the mandate has had a significant effect on insurance coverage decisions since these individuals are not eligible for subsidies or Medicaid expansion."

How the individual mandate scrambles the Senate tax cuts

The Senate Finance Committee's markup of the tax bill yesterday fixated on new tables from the Joint Committee on Taxation showing that, even before the lower individual rates expire, people with lower incomes would pay higher taxes.

Data: The Joint Committee on Taxation; Note: Nov. 9 proposal didn't include a repeal of the individual mandate or sunsets of the individual rates. Nov. 14 proposal included both. Chart: Andrew Witherspoon / Axios

The bottom line: Economists say this is mostly because the revised bill repeals the Affordable Care Act's individual mandate — so some people wouldn't buy health coverage, and therefore wouldn't get the tax credits to subsidize it.

Be smart: What this table is showing is lower-income people's taxes going up, in JCT's calculations, because some of them are no longer receiving the ACA premium subsidies. "This is all negative taxes disappearing. It's not like they have to write a check to the government in any way," said Doug Holtz-Eakin, president of the American Action Forum.

Go deeper: While there are other serious policy questions regarding repealing the mandate, Republicans do have a point when they say these people are choosing to give up their health coverage.

  • People receiving premium subsidies — generally people earning around $12,000–$50,000 a year — would be largely insulated from premium hikes following the mandate repeal, and therefore would be unlikely to drop coverage over affordability concerns.
  • "For people currently receiving premium tax credits, it really would be within their control whether to continue getting insured or not," said Larry Levitt of the Kaiser Family Foundation.
  • The biggest exception is if insurers pull out of markets, citing instability, and leave counties without any exchange plans.
Another big thing the tables show are higher rates in 2027. That's because the individual and small business tax cuts expire beginning in 2026, so unless Congress extends them, people will see a big tax hike when the lower rates sunset.

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The tax bill drama in the Senate

Sen. Ron Johnson said Wednesday he opposes the tax bill. Photo: Susan Walsh/AP

Parts of the Senate's tax bill — like the repeal of the Affordable Care Act's individual mandate and the sunset of the individual and small business tax cuts despite a permanent corporate tax cut — are endangering its passage.

Our thought bubble: Sen. Ron Johnson's declared opposition and the sudden prospect that the GOP could lose a Senate race in Alabama next month giving them only one vote to spare if the tax bill takes longer than a few weeks, have increased the odds of the tax bill's success. Driving Republicans forward is the intense pressure they face for a legislative victory.

Here's a rundown of where important senators stand on the bill:

The health care trio: These three senators sunk the health care bill in July. Inserting an individual mandate repeal into the tax bill has thrown their votes for it into question.

  • Sen. Susan Collins: The mandate repeal will increase premiums for people without health care subsidies on exchanges, which "would wipe out the tax cut that they would get under the bill...It is a political mistake as well because it complicates tax reform, and it means that no Democrat's going to vote for the bill – or it makes it much less likely."
  • Sen. Lisa Murkowski: "Tax reform is complicated, health care is complicated, when you mix the two together, it makes it even more complicated."
    • "My concern is what it might do to insurance premiums... I've got a little bit of homework to do in understanding where that is, because I think that's key to this."
    • "If you're going to include the repeal of the individual mandate, at a bare minimum, you have to have a fix like the Alexander-Murray...What I don't know is whether it helps it sufficiently."
  • Sen. John McCain: He voted against the health care bill because it didn't go through a normal process. He's not happy with how things are going with the tax bill. "I just picked up the newspaper today and they've made a huge change. Every day there seems to be – no, it's not" regular order, he said.
    • "I can't comment on every day's activities...But I lean toward the tax cuts."
    • On whether the tax bill can get back on track: "I have no idea, but I'm insisting on regular order."
Deficit hawks and sunset skeptics: The tax bill currently would add $1.415 trillion to the deficit over the next decade. To avoid adding to the debt after that, it ends the individual and small business tax changes after 2025, while keeping the lower corporate rate permanent.
  • Sens. Bob Corker and Jeff Flake have long been regarded as deficit hawks to watch. Both are also retiring, meaning they're free to vote their conscience.
  • Sen. Jerry Moran: He's currently undecided on whether he supports the tax components of the bill. "I would say the individual tax changes should be treated similarly to corporate tax changes as far as their permanency." He said it's also bad optics.
    • While Moran said the inclusion of mandate repeal won't keep him from voting for it, he thinks mixing health and tax is a bad idea. "There is an easier common ground to be found on taxes than there has been on health care, and so again, it takes something that has a greater potential, taxes, of being bipartisan and more broadly supported and reduces that."
  • Sen. Mike Lee is still weighing whether he's ok with the sunsetting rates, his office said.

Sen. Ron Johnson and Roy Moore:

  • Johnson said Wednesday he currently opposes the bill because it doesn't do enough to help small businesses.
  • Moore is currently polling well behind Democrat Doug Jones in the Alabama Senate race. If the GOP loses this seat and doesn't wrap up their tax work before Christmas, that means it'll have one vote to spare in the Senate.

The GOP tax bill tracker

The House is expected to vote on its rewrite of the tax code today, and the Senate Finance Committee could approve its version by the end of the day. Here are the main things you need to know.


Updated Senate tax bill ends individual tax cuts in 2026, keeps lower corporate rate

An updated version of the tax bill was released. Photo: J. Scott Applewhite/AP

Senate Finance Committee Chairman Orrin Hatch released the revisions to the Senate tax plan tonight. The new version sunsets most of the individual tax provisions after 2025, but makes the lower corporate tax rate permanent. It also repeals the Affordable Care Act's individual mandate.

What we're watching: Whether ending individual tax cuts — as well as repealing the individual mandate — while keeping the lower corporate rate sinks the bill. Making the rates temporary was done to make the bill comply with Senate budget rules for the process the GOP is using to pass the bill.

What else is in the new bill:

  • Increase of the child tax credit from $1,000 under current law to $2,000 (was $1,650 in old version of the bill), until 2026.
  • Slightly lowers some of the individual tax rates for middle-class brackets compared to the earlier version.
  • Modifies the rules surrounding the new deduction for pass-through taxation.

Senate tax bill will include individual mandate repeal

The Senate tax bill will repeal the individual mandate. Photo: J. Scott Applewhite/AP

The Senate plans to include a repeal of the Affordable Care Act's individual mandate in its tax bill. As part of the deal, the bipartisan ACA stabilization bill introduced by Sens. Lamar Alexander and Patty Murray will get a separate vote on the Senate floor.

"We're optimistic that inserting the individual mandate repeal would be helpful, and that's obviously the view of the Senate Finance Committee Republicans as well," Senate Majority Leader Mitch McConnell told reporters.

What to watch: Whether a tax bill that repeals the individual mandate can get 50 votes. If it's part of the package, odds are the answer is yes. But this definitely escalates the tax bill's drama — especially if and when the House and Senate must reconcile their versions.


GOP senators meet to discuss repealing ACA mandate in tax bill

Photo: J. Scott Applewhite/AP

Senate Republicans are actively discussing whether to repeal the Affordable Care Act's individual mandate in their tax bill. Sens Rob Portman and Pat Toomey presented on the issue during today's caucus lunch, after Toomey and Sen. John Thune made the pitch in meeting of Finance Committee members last night.

Sen Rand Paul also announced today he plans to introduce an amendment repealing the mandate. In an interview, Sen Tim Scott said there's probably strong member support for repeal, potentially even among all 14 GOP members of Finance, and confirmed that the policy was discussed at last night's Finance meeting.

Be smart: Of course there's strong member support to repeal the mandate. The question is whether there are 50 votes to include it in the tax bill.

— This post has been updated.


Senate tax bill creates winners and losers in each income group

Most taxpayers will either pay less or see little change under the Senate tax bill, but millions will pay more — some substantially more, according to an analysis of Joint Committee on Taxation data by the left-leaning Center on Budget and Policy Priorities.

Data: Center on Budget and Policy Priorities; Chart: Chris Canipe / Axios

Why this matters: Every tax bill creates winners and losers. While there are more winners under the Senate plan, each member will have to decide whether to vote for it knowing that some people will be made worse off.


Analysis finds House bill tax changes larger for the wealthy

The House bill's tax changes are higher for the wealthy. Photo: J. Scott Applewhite/AP

Almost half of net federal tax cuts under the committee-passed House tax bill would go to the top 1 percent of earners by 2027, although all income groups would see an average tax decrease under the bill, according to an analysis by the Tax Policy Center. The House plans to vote on the bill this week.

Be smart: You're going to hear different narratives over and over again this week. Democrats are going to say this bill is a giveaway to the wealthy, Republicans are going to say everyone is better off under the plan, and conservative wonks are going to (quietly) argue that cutting taxes on the wealthy and businesses is the way to boost the economy, benefiting everyone.

The impact: While taxes on net decrease under the bill for each income group, some people's taxes will go up and some will go down within each income group. In 2027, at least 24 percent of taxpayers would pay higher taxes.
  • Lowest quintile: pays $10 less in federal taxes
  • Second quintile: pays $50 less in federal taxes
  • Middle quintile: pays $360 less in federal taxes
  • Fourth quintile: pays $840 less in federal taxes
  • Top quintile: pays $4,590 less in federal taxes
  • Top 1 percent: pays $62,300 less in federal taxes
  • Top .1 percent: pays $320,640 less in federal taxes