Despite what Justice Roberts used as justification to uphold it, the Affordable Care Act is not a tax on the middle class. And it’s certainly not the “biggest tax increase in the history of the world,” as Rush Limbaugh so melodramatically (and tragicomically) put it.
These (comically) blatant misinformation campaigns have (tragically) served those hell bent on derailing the ACA dangerously well so far, so here’s a resolution for those of us interested in ensuring our patients get better access to care: from now on, let’s more aggressively refute the lies with facts. I’ll start.
The ACA offers tax credits and cost-sharing for individuals making between 100 and 400 percent of the federal poverty level, which helps people satisfy the individual mandate when they can’t afford insurance and don’t qualify for Medicaid. Moreover, small businesses qualify for tax credits if they have no more than 25 employees and average wages of $50,000 per year.
For those who do not purchase health insurance, the health law imposes a penalty starting at $95 or 1 percent of adjusted gross income per adult (whichever is greater) in 2014, and gradually goes up to $695 or 2.5 percent by 2016.
The nonpartisan Congressional Budget Office (CBO) estimates that 4 million individuals (1.2 percent of the population) will pay IRS penalties in 2016 because of the mandate. In fact, far more people will receive subsidies than incur penalties under this law. The CBO estimates 16 million (5 percent of the population) people will receive credits of subsidies to help pay for insurance coverage through the new health insurance exchanges in 2016.
So, according to CBO estimates, 1.2 percent of the population will pay penalties while 5 percent will receive tax credits or subsidies.
And regardless of what you call it, the individual mandate is a small component of the new law’s taxes. In 2019, the Affordable Care Act is expected to bring the federal government $104 billion in new revenue. The individual mandate accounts for about $7 billion of that.
The law’s biggest tax increase, at least in the first decade, is a 0.9 percent increase in the Medicare payroll tax paid by Americans earning more than $200,000 a year. And to be fair, the ACA does generate revenue to pay for itself with other taxes and fees as well, including an excise tax on high premium health insurance plans (the so called ‘Cadillac plans’), fees on certain manufacturers and insurers, a surtax on investment income for the wealthy, a tax on medical device manufacturers, and a tax on indoor tanning services. It’s hard to make a convincing argument that any of these, however, directly affect the middle class.
If the ACA works as expected by the most nonpartisan governmental analysis we have available, it will clearly provide more tax relief than tax burden for middle class Americans. Spread the word.