Free Affordable Care Act From Unpopular Taxes | Commentary
By Dan Maffei Even as the White House touts its success, the Affordable Care Act, dubbed “Obamacare,” remains unpopular. However, many of the most hated provisions – new taxes – are not vital to the law’s purpose, which is to ensure Americans can access affordable health insurance.
These unnecessary provisions include taxes on medical device manufacturers and health insurance premiums, as well as a special tax on so-called “Cadillac” comprehensive health plans. These taxes are all likely to increase costs for patients – precisely the opposite of what the ACA is supposed to do. Unlike the law’s penalty for violating the mandate to obtain insurance, these taxes have no purpose other than to help us say the ACA would reduce future deficits.
When the ACA was signed into law, the Congressional Budget Office (CBO) projected it would reduce the federal deficit by $210 billion in the first 10 years.
Most Americans neither know nor care about the CBO’s budgetary projections. And perhaps they shouldn’t. The forecasts are frequently much less accurate than predicting the winners of horseraces. Take the ACA’s tax on tanning salons. For this tax, the CBO’s nonpartisan budget experts predicted the provision would raise $2.7 billion in revenue over the first 10 years. But the actual amount the tax has raised is, in reality, now about a third of the annual projections. Moreover, under the burden of this tax, so many tanning salons — mainly small businesses — are shutting down that the actual revenue raised will keep decreasing.
In the meantime, this tax has cost thousands of jobs and closing tanning salons turns out not to be a boon to public health. First, using a tanning salon under proper supervision can be much less dangerous than lying out on the beach attempting to keep track of your own UV exposure. Second, many of these tanning salons offer spray tanning as an alternative to a tanning bed or lying out in the sun. Whatever your views are on the health effects of tanning, the tax was not included in the ACA for health reasons. It was to plug a revenue hole plain and simple, and it is not working well at that.
In the case of the tax on medical device manufacturers, as well as another tax that hits innovative pharmaceutical companies, the ACA’s revenue raisers are a disincentive to research and development. Less innovation means that, in the long run, health care costs will go up relative to patient outcomes. In other words, these taxes may save us money in the short run but may cost more in the long run.
My radical proposal for my former colleagues in Congress is to repeal all of these extraneous taxes. If possible, they should be replaced with revenue raisers that make more sense. But even if we can’t agree on new “pay-fors,” any tax that does not have an essential ACA-related purpose should still be scuttled. We should free the ACA from these taxes that are a drag on its popularity and detrimental to the economy.
But wouldn’t that add trillions to the deficit? Many of the ACA’s proponents believe the more significant deficit reduction in the ACA is not due to these taxes but the fact that the ACA reduces overall health care costs. Reducing health care costs was mostly not considered in the CBO’s estimates of the ACA’s budgetary impact because of the arcane rules under which those estimates are produced.
However, since the ACA became law, the savings are coming true. According to data compiled by the White House, the rate of increase in real health spending per person is at its lowest point in a half century. And the CBO announced in March that the costs associated with the ACA would be 11 percent less over the next decade, according to revised projections. Furthermore, a notable reduction in Medicare-cost growth would, if it continues, translate into trillions of budgetary savings over the next 20 to 30 years. We could repeal all of the ACA’s unnecessary taxes today and still be better off in terms of the federal budget than before the law.
Washington should take a page from citizens outside the Beltway – ignore bureaucratic budget projections and dump taxes that harm jobs and innovation. It’s the right thing to do.
Dan Maffei is a former Democratic congressman from New York.
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