The ACHA Bill Is a Tax Cut for Rich Americans

The GOP’s Obamacare replacement bill has an identity crisis. It repeals the individual mandate and replaces it with a worse mandate. It preserves the Medicaid expansion just long enough to anger Republicans, but not enough to please Democrats. It replaces Obamacare’s subsidies with tax credits that liberals consider impoverishing and conservatives consider unacceptable.

In the old days, legislatures used pork to try to please everybody. This bill seems exquisitely designed to please nobody—except for rich people who want a tax break. Perhaps that’s why one of the few groups to praise the bill was Americans for Tax Reform.

Look beyond the bill’s quasi-mandate and tax credits, and the Obamacare replacement bill is a $600 billion tax cut, with the benefits going almost entirely to the wealthy. To pay for its spending, Obamacare included several taxes on couples making more than $250,000, like a 3.8 percent surtax on investment income and a 0.9 percent surtax on wages. Last year, those levies brought in about $27 billion, according to Wall Street Journal analysis of IRS data. Repealing them would cost about $275 billion over the next decade; which is to say, it would transfer $275 billion from public-health spending to the richest 1 or 2 percent. Other provisions, like repealing the limit of flexible spending accounts and expanding health savings accounts, will also disproportionately benefit the rich.

That’s not all. Many companies can deduct employee salaries as a business expense when they pay taxes. Obamacare included a provision that prevented insurance companies from deducting more than $500,000 of their top executives' salaries, as a way of raising a little bit of revenue and discouraging ever-rising compensation for insurance executives. But the Republican replacement law scraps that provision, so that large insurance companies like Cigna and Aetna, which pay their CEOs more than $15 million, would find new tax savings.

Republicans have railed against many problems with the new health care law. But nobody is complaining about cutting taxes, because cutting taxes is the fundamental objective of Republican economics. This is not an explosively accusatory claim, but an objective description of policy. The recent and present leaders of the party—Donald Trump, Mitt Romney, Paul Ryan, Jeb Bush, and Marco Rubio—might have major disagreements over immigration, trade, Social Security, and Russia. But each of them has proposed a tax cut that would disproportionately benefit the rich, with all five plans cutting taxes for the top 1 percent by at least $150,000 and decreasing overall revenue by at least $5 trillion in a decade.

The three legs of Republican fiscal policy—the Trump budget, the Obamacare replacement, and tax reform—are all wobbly. But the unifying policy of GOP economics remains so obvious, it raises the question: Why not just scrap “repeal-and-replace” and pass a big beautiful tax cut? In fact, I think that’s precisely what will happen. The GOP is like a dysfunctional extended family whose patriarchs have nothing in common but DNA with one basic genetic instruction: to reduce the punishing burden of being a rich person in America.

About the Author

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the media. He is the author of Hit Makers.

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Americans don’t realize how fast the country is moving toward becoming a better version of itself.

I have seen the future, and it is in the United States.

After a several-year immersion in parts of the country that make the news mainly after a natural disaster or a shooting, or for follow-up stories on how the Donald Trump voters of 2016 now feel about Trump, I have a journalistic impulse similar to the one that dominated my years of living in China. That is the desire to tell people how much more is going on, in places they had barely thought about or even heard of, than they might have imagined.

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In the case of China, that impulse matched the mood of the times. In the years before and after the world financial crisis of 2008, everyone knew that China was on the way up; reporters like me were just filling in the details. In the case of the modern United States, I am well aware that this message runs so counter to prevailing emotions and ideas as to seem preposterous. Everyone knows how genuinely troubled the United States is at the level of national politics and governance. It is natural to assume that these disorders must reflect a deeper rot across the country. And indeed, you can’t travel extensively through today’s America, as my wife, Deb, and I have been doing in recent years, without being exposed to signs of rot, from opioid addiction to calcifying class barriers.