Repealing Obamacare would be a big tax boon for wealthy Americans.
That’s because it would eliminate two surcharges on the rich that are being levied to help pay for Obamacare provisions, such as the federal subsidies for low- and moderate-income enrollees.
Since 2013, single taxpayers with incomes above $200,000 and couples making more than $250,000 annually have had to pay an additional 0.9% Medicare payroll tax on the amount they earn above these thresholds. These taxpayers may also be hit with a tax surcharge of 3.8% on investment income above those thresholds.
Ending Obamacare would mean that nearly everyone in the Top 1%, who earn more than $774,000 a year, would enjoy a hefty tax cut, averaging $33,000, according to a new report by the non-partisan Tax Policy Center. Those in the Top 0.1% would get an average tax cut of about $197,000.
Other Americans, however, would not be as fortunate.
Obamacare provides federal tax subsidies for enrollees with incomes below $47,520 for a single person or $97,200 for a family of four. Some 85% of the roughly 10.4 million people enrolled this year receive subsidies to lower their premiums. Those earning even less — $29,700 for an individual and $60,750 for a family of four — are also eligible for cost-sharing subsidies that reduce their deductibles and out-of-pocket expenses. These would disappear if the health reform law were dismantled.
That would result in an average tax increase of $90 for the lowest-income taxpayers, who make less than $25,000 a year, the Tax Policy Center reports. However, the average masks a wide variation. Most households would see no change, but about 7% would see a tax cut of about $1,200, on average, while 4% would face a massive hike of $3,900, mainly because they’d lose their subsidies.
Middle class households would be hit with an average tax increase of $80, but that is also misleading. About 94% of these taxpayers, who make between $52,000 and $89,000, would see a tax cut of $110, but 3% would be socked with a $6,200 hike because of the elimination of the subsidies.
