Republican health bill could widen America's wealth gap by increasing taxes on lower income families

Posted at 5:04 AM, Mar 23, 2017

House Republicans' health care bill provides massive tax cuts to the wealthy while increasing taxes for many lower income families, adding to America's big income gap between the rich and everyone else.

Over the past quarter century, only one group of people has seen significant increases in income — those at the very top. Families in the middle or at the bottom of the economic ladder have seen little or no increase in wages.

And since 2000, most middle- and low-income families have seen their incomes drop, when inflation is taken into account, according to Census Bureau data.

The GOP health bill exacerbates those disparities, according to a new report by the nonpartisan Tax Policy Center. On average, taxes would go down for families making more than $50,000 a year, while taxes would increase for many families making less, the report said.

"This is a massive transfer of wealth from working families to the very richest people in this country," said Sen. Bernie Sanders, I-Vt. "In this case, all the people will be forced to pay more for health insurance while billionaires get a tax break."

Income disparities and an eroding middle class helped spawn two populist political movements during last year's presidential election. Sanders was the standard-bearer on the left as he ran for the Democratic nomination. President Donald Trump led the movement on the right.

Yet Trump's first piece of major legislation doesn't provide much tax relief for the white working-class voters who supported him. Regardless, Trump is pressing hard for House Republicans to vote for the bill, meeting with wavering lawmakers at the Capitol and the White House.

The House is expected to vote on the bill Thursday.

The measure would repeal major parts of former President Barack Obama's health law, capping future funding for Medicaid and cutting tax increases for high-income families, health insurance companies and drug makers.

The biggest tax cut would eliminate a 3.8 percent tax on investment income for high-income individuals and families. Another would repeal an extra 0.9 percent Medicare tax on wages above $200,000 for individuals and $250,000 for married couples.

Families making more than $200,000 would get tax cuts averaging $5,680 a year, once the bill is fully implemented, according to the Tax Policy Center report. The average tax cut jumps to more than $51,000 for families making more than $1 million a year.

"That's not what Trump ran on. He ran on helping the little guy," said Rep. Joseph Crowley, D-N.Y. "I would think if you got all of the millionaires in a room, they're not going to turn it down, but they would admit to you they don't need this assistance. They don't need a $50,000 tax break."

House Republicans highlight the tax cuts, noting that many small business owners would get relief. They also say their bill would repeal several Obamacare mandates — one on individuals to get health insurance and one on large employers to provide coverage to workers.

In place of these mandates, Republicans say they offer a plan that provides more choice and less government interference for patients.

"The bottom line is, we made a promise to repeal and replace Obamacare, and we are going to keep our word," said House Speaker Paul Ryan, R-Wis.

The bill raises taxes for some because it repeals tax credits that people can use to purchase health insurance on marketplace exchanges. It replaces them with a new tax credit that is less generous for most.

The tax hikes would be relatively small but they would hit the working poor who could least afford it. For example, families making between $20,000 and $30,000 a year would get tax increases averaging $200. Families making between $30,000 and $40,000, would get tax hikes averaging $180.

Many of these families have seen their wages stagnate for much of the past 20-plus years.

From 1979 to 2015, middle-income households saw their incomes rise by just 14 percent, when inflation is taken into account, according to Census Bureau statistics. These households make an average of $56,800 a year.

Over the same period, low-income households saw their incomes rise just 2 percent. These households average just $12,500 a year in income.

Meanwhile, the top 5 percent of households saw their incomes jump 75 percent. The average income for these households: $360,000 a year.

"The issue here is that for 30 or 40 years, the middle class in this country has been shrinking," said Sanders, echoing one of the main themes of his failed presidential campaign.

"Clearly, Trump's so-called health care plan and certainly his budget will make a very bad situation worse — more tax breaks for the rich, throwing millions off their health insurance and cutting back on programs that working families need," he said.


Follow Stephen Ohlemacher on Twitter at: