Repealing the individual mandate is a middle-class tax cut
The only thing Republicans need to do to give low- and middle-income families a tax cut is to repeal the individual mandate under Obamacare.
You wouldn’t know it from all the Democratic hysteria over the Senate Republican plan to do just that, but it’s obvious if you’re willing to look.
Think about what the individual mandate is. It’s a tax — per Chief Justice John Roberts — for not buying insurance. Yes, Obamacare has made insurance so unaffordable that the government has to force people to buy coverage. Ever wonder why then-president Barack Obama insisted on the individual mandate while promising Obamacare would lower the typical family’s premium by $2,500 a year? It looks like he knew his plan would dramatically increase insurance rates. Which it has. In Nevada, rates have quadrupled in just four years.
Unsurprisingly, then, the individual mandate has hit low- and middle-class taxpayers the hardest.
In 2015, 80 percent of Nevadans who paid an individual mandate tax penalty made under $50,000 a year. Thirty-nine percent made under $25,000. That’s according to IRS data compiled by Sen. Steve Daines, R-Mont.
This is important to remember when you hear Democrats and others on the left breathlessly assert that the Republican plan will cause 13 million people to lose insurance. This is like saying a kidnapped man would lose his housing if rescued by the police. It’s technically true, but it misses the main point: Forgoing insurance would be a choice they would be free to make.
There would be implications for the health insurance market. Obamacare requires insurance companies to cover people with pre-existing conditions. That’s like allowing someone to get car insurance 30 seconds after they’ve caused a four-car pile-up. Costs go up dramatically because you’re paying for known expenses, instead of pooling future risk. That’s why Obamacare needs the individual mandate. It must force healthy people to buy insurance or costs will explode even more than they already have.
That’s a reason to repeal Obamacare, not a reason to keep the individual mandate.
Eliminating the individual mandate has another bonus. The Congressional Budget Office projects repealing it will save the government $338 billion over the next 10 years. It’s counterintuitive that cutting a tax will save the government money, but the CBO believes fewer people will sign up for Medicaid or insurance subsidies.
Another thing Republicans are doing to help low- and middle-income taxpayers is lowering rates by repealing the state and local tax deduction, called SALT. Both the House and Senate bills remove the ability to deduct state income and sales taxes. The House bill limits property tax deductions to $10,000, while the Senate bill removes that deduction entirely. This deduction has long allowed high-tax states, such as California and New York, to partially subsidize their prolific spending on the backs of Nevada taxpayers.
Even the far-left website Vox.com admits that “SALT helps the wealthy — and residents of high-tax states — the most.” So why are Democrats fighting to keep it? Because wealthy taxpayers in California will revolt if they have to bear the full cost of California’s spending.
To recap: Democrats are upset that Republicans want to cut taxes on low- and middle-income families and raise taxes on rich Californians.
There are details to figure out, but that’s a good place to be starting from.
Victor Joecks’ column appears in the Opinion section each Sunday, Wednesday and Friday. Listen to him discuss his columns each Monday at 9 a.m. with Kevin Wall on 790 Talk Now. Contact him at vjoecks@reviewjournal.com or 702-383-4698. Follow @victorjoecks on Twitter.