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House to Consider Another $59 Billion of Tax Cuts

Sep 13, 2018 | Health Care| Taxes

The House will likely consider a package of health-related tax cuts this week, separate from the permanent extension of the 2017 tax law considered by the Ways and Means Committee. The Save American Workers Act (H.R. 3798) would roll back and delay multiple tax provisions from the Affordable Care Act at a cost of $59 billion over ten years.

The bill would make a few different changes to the mandate that employers offer health insurance to their employees. The first change would increase the amount of hours an employee must work to count for the employer mandate from 30 per week to 40. This change would be retroactive starting in 2014. Since employers would pay less in penalties and some people would shift from their employer's insurance onto subsidized forms of insurance, the change would cost $19 billion over ten years. In addition, the bill would eliminate employer penalties from 2015 through the end of this year at a cost of $26 billion. The elimination of the employer mandate was previously approved by the Ways and Means Committee in a different package of health-related tax cuts.

The other major change would delay the implementation of the "Cadillac tax" on high-cost insurance plans from 2022 to 2023 at a cost of $14 billion. The tax has already been delayed twice (from 2018 to 2020 and 2020 to 2022), so a third delay would further cement the likelihood that the tax could be repealed permanently at a very high long-term cost

As we've pointed out before, the Cadillac tax reduces deficits and has been shown to have effects that reduce private health care spending even before the tax goes into effect. If Congress ultimately repeals the Cadillac tax, they should replace it with an alternative cap on the tax exclusion for employer-sponsored health insurance or another provision that produces long-term health savings.

Finally, the bill would repeal the tanning tax, reducing revenue by $0.4 billion over ten years.

In total, these policies would cost $59 billion over ten years, or about $73 billion including interest.

Policy Ten-Year Cost
Increase threshold for employer mandate from 30 hours to 40 hours per week $18.6 billion
Repeal employer mandate penalties for 2015-2018 $25.9 billion
Delay Cadillac tax from 2022 to 2023 $13.6 billion
Repeal tanning tax $0.4 billion
Total $58.5 billion
Interest $14 billion
Total With Interest $73 billion

Sources: Congressional Budget Office, CRFB calculations

With the tax cuts that were already passed in recent months and the others that have been proposed, H.R. 3798 would further compound the irresponsibility of this Congress. Already, 55 percent of next year's deficit is due to legislation since 2015, with most of the impact from last December's tax cuts and this February's discretionary spending increases.

If lawmakers want to pass yet more tax cuts, they should offset them with savings elsewhere in the budget, either proposing spending reductions or other revenue increases.

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