November 17,2017

Press Contact:

202-224-4515, Katie Niederee and Julia Lawless

Repealing the Individual Mandate Tax Will Benefit Middle Class

Senate Tax Plan Repeals Regressive Tax, Providing Relief For Low- and Middle-Income Americans

The Finance Committee’s tax reform plan includes the repeal of the regressive and punitive individual mandate tax, providing relief for working-class families who may not be able to afford or may not want to purchase health insurance. The proposal has received high-praise from thought-leaders. 

Wall Street Journal’s Editorial Board agrees: “Republicans are right to want to repeal the mandate that fines Americans who don’t buy health insurance…The individual mandate scores as a savings of $338 billion over 10 years that will be redeployed mostly for tax relief for individuals. The savings continue in year 11 and beyond, which means the 20% corporate rate can be permanent. This is important for sound tax policy and business investment.” 

As does The New York Times’s Margot Sanger-Katz: “Mr. Hatch has a point. The subsidies may count, technically, as tax benefits, but they are relatively unusual in the tax code, because they can be used only to buy health insurance. People who get insurance can get a gift card. People who don’t get nothing.” 

More from Avik Roy: “The mandate is unlikely to be having a meaningful effect on the health insurance market. To the degree that it is, it forces people to buy insurance that they otherwise would find unaffordable.” 

Douglas Holtz-Eakin explains: “When Kelly from South Carolina making between $10,000 and $20,000 buys Obamacare insurance, she receives a subsidy to help cover the cost. That subsidy is a “premium tax credit” – in English, negative taxes in the form of cash for health insurance. When she walks away from buying insurance, she walks away from the negative taxes…Kelly wouldn’t quit buying insurance unless it made her better off – that doesn’t sound like a tax increase.” 

Ryan Ellis breaks it down: “The Obamacare individual mandate penalty tax is squarely aimed at the middle class. Almost all who pay it make less than $200,000 per year, and 80 percent of families who pay it make less than $50,000 per year. Their average Obamacare tax bill is $450. Tax reform permanently repeals Obamacare's individual mandate surtax.” 

From Tax Foundation’s Nicole Kaeding: “The Congressional Budget Office assumes that many individuals purchase insurance only because the individual mandate requires them to do so. As a result, when fewer individuals purchase health insurance from an exchange, fewer individuals receive premium tax credits. Less of an advanceable refund from the Treasury results in the appearance of a tax increase under JCT’s distributional analysis.. Much attention is being paid to the new distributional tables being released by JCT this morning, but their results don’t quite seem to show what some are suggesting.”