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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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