This Bill to Repeal Obamacare Taxes Would Grow the Economy
October 22, 2015
The White House last night issued a veto threat of a bill that would eliminate a number of provisions of the Affordable Care Act (ACA). The cost estimate for the bill, written by the Congressional Budget Office (CBO), has a good description of the bill’s provisions:
The largest budgetary effects of enacting the legislation would stem from:
- Repealing provisions of the Affordable Care Act (ACA) that require most people to obtain health insurance coverage and large employers to offer their employees health insurance coverage that meets specified standards or pay penalties; and
- Repealing the federal excise taxes imposed on the sale of medical devices and on certain employer-provided health coverage with premiums above specified amounts.
Other parts of the legislation that affect the budget would:
- Repeal the requirement that certain large employers automatically enroll new employees in health insurance plans and continue the enrollment of current employees in a health insurance plan;
- Eliminate the Prevention and Public Health Fund and rescind any unobligated balances of the fund;
- Prohibit federal funds from being made available, for one year, to certain entities that provide abortions;
- Increase the amount of funding authorized and appropriated to the Community Health Center Fund; and
- Repeal provisions of the ACA that establish the Independent Payment Advisory Board.
The bill would, in other words, repeal some of the most controversial elements of the ACA. Curiously, the bill actually reduces the deficit over the ten-year budget window, largely because the repeal of the individual mandate would stop mandating consumers to sign up for subsidized health insurance, reducing spending.
While the White House veto threat made some good points about how the ACA increases insurance coverage, this particular argument from the White House seems unusually thin:
H.R. 3762 would increase the deficit in the long term and detract from the work the Congress could be doing to foster job creation and economic growth.
H.R. 3762 is indeed likely to increase the deficit at some point over the long run due to its repeal of the Cadillac Tax, which eventually would become more significant than the reduced spending. However, over the traditional ten-year budget window, the CBO projects that the act would have already reduced the debt by $130 billion. (If the bill is not sufficiently revenue-increasing, then perhaps the Cadillac Tax could be reduced rather than repealed entirely.)
However, the latter half of the sentence—the claim that the bill would “detract from the work the Congress could be doing to foster job creation and economic growth”—is rather silly. From the very same CBO report, the CBO makes it very clear that the bill would boost employment and incomes:
According to the agencies’ estimates, from 2021 through 2025, the bill would increase gross domestic product (GDP) by about 0.2 percent, on average—mostly by repealing provisions of the ACA that, under current law, are expected to reduce the supply of labor.
The macroeconomic feedback effects of H.R. 3762 would lower federal deficits by $51 billion over the 2016–2025 period, CBO and JCT estimate. The largest effect would be an increase in revenues arising from the increased supply of labor, which in turn would boost employment and taxable income.
While the White House statement makes a vague, positive reference to “the work the Congress could be doing to foster job creation and economic growth” it is sharply negative about the work the Congress is actually doing right now to foster job creation and economic growth.
The CBO has been consistent, for quite some time, on the fact that the ACA has some tax provisions that reduce employment. It is not unreasonable for Congress to try to remove them while preserving other, better parts of the health care law.