There has been confused public discussion about the effects of the Reid bill on low- and middle-income taxpayers. Senator Grassley and his Finance Committee staff have worked with the Joint Tax Committee staff to disentangle the strands a present and clearer picture of the actual financial effects of the Reid bill on different middle class populations.
Grassley’s staff summarize the results this way:
First, there is a group of low- and middle-income taxpayers who clearly benefit under the bill. This group, however, is relatively small. There is another much larger group of middle-income taxpayers who are seeing their taxes go up due to one or a combination of the following tax increases: (1) the high cost plan tax, (2) the medical expense deduction limitation, and (3) the medicare payroll tax. In general, this group is not benefiting from the tax credit (because they are not eligible for the tax credit), but they are subject to the tax increase(s). Also, there is an additional group of taxpayers who would be affected by other tax increase provisions that JCT could not distribute. Finance Committee staff is working with JCT to determine how to identify this “un-distributed” group of people. … This analysis reveals that while a relatively small group of middle-class individuals, families, and single parents are benefiting under the Reid bill, a much larger group of middle-class individuals, families, and single parents are disadvantaged.
Senate Democrats have used a different JCT analysis that show the combined effects on these two populations when blended together. You have a relatively small group of people getting big net benefits, and a much larger group paying net costs. The aggregate impact for the two populations combined is a net benefit for the group as a whole, and advocates for the bill have therefore argued the bill is a “middle class tax cut.” Senator Grassley and his staff deserve credit for separating the effects on distinct (and large) subpopulations.
Here’s the quantitative summary for the Reid bill. All figures are for the year 2019, and in each case these are net results of premium changes, tax subsidies, and tax increases.
- 17.8 million individuals, families, and single parents with incomes under $200K will be net financial winners (11% of all tax returns under $200K):
- Of that 17.8 million total, 13.2 million of them will benefit from the government subsidy for health insurance, net of any premium increases.
- The other 4.6 million of them will also benefit, netting out their premium reduction with the higher taxes they will pay. These people in general will not get a health insurance subsidy.
- 68.4 million individuals, families, and single parents with incomes under $200K will be net financial losers (41% of all tax returns under $200K):
- In general these people are not eligible for premium subsidies, so the effects of he Reid bill on them are direct premium effects and/or tax increases.
- Within this group, here are some representative averages, taking into account premium changes, tax subsidies for premium purchase, and tax increases:
- Within this population of 68.4 million net losers, an average individual working for a small business who gets health insurance through the small group market will be worse off, even if his income is below $10K per year:
- Income of 0 – $10K: He pays $31 more (per year).
- Income of $10K – $20K: He pays $99 more.
- Income of $20K – $30K: He pays $202 more.
- Income of $30K – $40K: He pays $325 more.
- Income of $40K – $50K: He pays $377 more.
- Income of $50K – $75K: He pays $576 more.
- Income of $75K – $100K: He pays $681 more.
- Income of $100K – $200K: He pays $726 more.
- If this individual works for a large employer buying insurance in the large group market, the bill helps him if his income is <$20K, and hurts him if his income is >$20K:
- Income of 0 – $10K: He pays $135 less.
- Income of $10K – $20K: He pays $67 less.
- Income of $20K – $30K: He pays $36 more.
- Income of $30K – $40K: He pays $159 more.
- Income of $40K – $50K: He pays $211 more.
- Income of $50K – $75K: He pays $410 more.
- Income of $75K – $100K: He pays $515 more.
- Income of $100K – $200K: He pays $561 more.
- For an average family among the 68.4 million losers getting insurance through the small group market (including most small business employees), they are on average better off if their family income is <$20K, and worse off if their income is >$20K. If they get insurance through a large employer, the breakpoint is $30K.
- For an average single parent among the 68.4 million losers, he or she will be better off if income is <$20K, and worse off if income is >$20K, whether he or she gets insurance in the small group or large group markets.
- Within this population of 68.4 million net losers, an average individual working for a small business who gets health insurance through the small group market will be worse off, even if his income is below $10K per year:
While the press obsesses over the public option and abortion, will they pay sufficient attention to the harder-to-explain components of the bill that would make 68.4 million middle-class individuals, families, and single parents worse off?
Lots more detail is below and linked, courtesy of Senator Grassley and his fine staff.
From Senate Finance Committee Republican staff
Here is an analysis of the premium changes, tax subsidies, and tax increases under the Reid bill. Here are the JCT tables that were the basis for these findings: 4 tax provisions in 2019, tax credits in 2019, and universe of returns in 2019. The other data source is the November 30th CBO letter to Senator Bayh.
Based on this analysis, Finance Committee staff believes we can summarize the benefits and disadvantages to individuals, families, and single parents under the Reid bill this way: First, there is a group of low- and middle-income taxpayers who clearly benefit under the bill. This group, however, is relatively small. There is another much larger group of middle-income taxpayers who are seeing their taxes go up due to one or a combination of the following tax increases: (1) the high cost plan tax, (2) the medical expense deduction limitation, and (3) the medicare payroll tax. In general, this group is not benefiting from the tax credit (because they are not eligible for the tax credit), but they are subject to the tax increase(s). Also, there is an additional group of taxpayers who would be affected by other tax increase provisions that JCT could not distribute. Finance Committee staff is working with JCT to determine how to identify this “un-distributed” group of people.
Further Analysis Reveals Benefits and Disadvantages to
Individuals, Families, and Single Parents
Analysis of Premium Changes, Tax Subsidies, and Tax Increases
On November 30, 2009, the Congressional Budget Office (CBO) estimated the average premiums for single and family health insurance policies purchased in the non-group market and offered by small businesses and large employers under both the Reid bill and current law. The Joint Committee on Taxation (JCT) has provided Finance Committee Republican staff with a distributional analysis of four of the major tax provisions in the Reid bill, along with a distributional analysis of the number of tax returns that will receive the premium tax credit for health insurance for 2019. Based on this data, Finance Committee Republican staff compared the average premium change, according to CBO, with the average subsidy or tax increase individuals, families, and single parents would see, based on JCT data in 2019, and concluded following:
- According to JCT, 13.2 million individuals, families, and single parents or 8% of all tax returns under $200,000 in 2019 will benefit from receiving the government subsidy for health insurance, net of any health insurance premium increases under the Reid bill.
- According to JCT, a group of 4.6 million individuals, families, and single parents or 3% of all returns under $200,000 in 2019 will also benefit from a premium reduction, net of a tax increase, under the Reid bill. In general, this group of 4.6 million individuals, families, and single parents are NOT eligible to receive the subsidy for health insurance.
- According to JCT, a group of 68.4 million individuals, families, and single parents or 41% of all returns under $200,000 in 2019, however, will be worse off as a result of a tax increase, net of any premium reduction, under the Reid bill. In general, this group of 68.4 million individuals and families are NOT eligible to receive the subsidy for health insurance.
- An average individual who receives health insurance through a small employer and earning between $0 and $200,000 would be paying, on average, a range of $31 to $726 more. In the large group market, an average individual making between $20,000 and $200,000 would be paying, on average, a range of $36 to $561 more.
- An average family who receives health insurance through a small employer and earning between $20,000 and $200,000 would be paying, on average, a range of $82 to $892 more. In the large group market, an average family making between $30,000 and $200,000 would be paying, on average, a range of $116 to $724 more.
- An average head of household who receives health insurance through a small employer and earning between $20,000 and $200,000 would be paying, on average, a range of $383 to $1,587 more. In the large group market, an average head of household also making between $20,000 and $200,000 would be paying, on average, a range of $185 to $1,419 more.
This analysis reveals that while a relatively small group of middle-class individuals, families, and single parents are benefiting under the Reid bill, a much larger group of middle-class individuals, families, and single parents are disadvantaged.
Background
Premium Analysis – CBO has estimated the average premiums in 2016 for a single and family health insurance policy in (1) the non-group, (2) the small group, and (3) the large group health insurance markets under both the Reid bill and current law. Based on CBO data, we can identify the average annual increase in premiums in each of these markets under the Reid bill and current law. Based on these CBO’s estimates and data, we can project the cost of a single and family health insurance policy in (1) the non-group, (2) the small group, and (3) the large group markets under the Reid bill and current law in 2019.
Tax Increase and Subsidy Analysis – JCT has provided Finance Committee staff with a distributional analysis of four of the major tax provisions in the Reid bill – (1) the advance-refundable tax credit for health insurance, (2) the high cost plan tax, (3) the medical expense deduction limitation, and (4) additional Medicare payroll tax. Separately, JCT has provided a distributional analysis of the number of tax returns that will receive the premium tax credit for health insurance. Based on this data, we can determine how many individuals, families, and single parents receive the premium tax credit for health insurance. We can also identify (1) those individuals, families, and single parents who are NOT eligible to receive the tax credit and (2) those individuals, families, and single parents whose taxes may go up before they see some type of tax reduction from the tax credit.
Eligibility for the Subsidy for Health Insurance – Under the Reid bill, individuals, families, and single parents between 133% and 400% of the Federal Poverty Level (FPL) who purchase health insurance through the “exchange” would be eligible for a subsidy for health insurance. In general, individuals, families, and single parents who get health insurance through their employer are NOT eligible for the subsidy, even if they are below 400% of FPL.
Analysis
Comparison of Subsidy for Health Insurance and Premium Increase
Based on the projected cost of an average single and family health insurance policy in the non-group market in 2016, and based on CBO data on the average premium inflation rates under the Reid bill and current law, Finance Committee Republican staff projected the average cost for these plans in the non-group market in 2019. Staff then compared the premium changes with the average subsidy for health insurance an individual, family, or single parent would receive based on JCT data. The below tables illustrate this comparison.
As we can see from the below tables, every individual, family, or single parent is benefiting irrespective of a premium increase.
Non-Group – Single
| Income | Premiums Under Reid Bill | Premiums Under Current Law | Premiums Increase | Subsidy | Net Premium Increase/Premium Subsidy |
| $0 to $10,000 | $6,953 | $6,444 | $509 | ($6,500) | ($6,218) |
| $10,000 to $20,000 | $6,953 | $6,444 | $509 | ($5,694) | ($5,412) |
| $20,000 to $30,000 | $6,953 | $6,444 | $509 | ($4,723) | ($4,441) |
| $30,000 to $40,000 | $6,953 | $6,444 | $509 | ($3,742) | ($3,459) |
| $40,000 to $50,000 | $6,953 | $6,444 | $509 | ($4,075) | ($3,793) |
| $50,000 to $75,000 | $6,953 | $6,444 | $509 | ($3,304) | ($3,022) |
| $75,000 to $100,000 | $6,953 | $6,444 | $509 | ($667) | ($384) |
| $100,000 to $200,000 | $6,953 | $6,444 | $509 | ($1,500) | ($1,218) |
Non-Group – Family
| Income | Premiums Under Reid Bill | Premiums Under Current Law | Premiums Increase | Subsidy | Net Premium Increase/Premium Subsidy |
| $10,000 to $20,000 | $19,026 | $15,387 | $3,639 | ($9,183) | ($5,544) |
| $20,000 to $30,000 | $19,026 | $15,387 | $3,639 | ($14,127) | ($10,489) |
| $30,000 to $40,000 | $19,026 | $15,387 | $3,639 | ($14,647) | ($11,008) |
| $40,000 to $50,000 | $19,026 | $15,387 | $3,639 | ($14,129) | ($10,490) |
| $50,000 to $75,000 | $19,026 | $15,387 | $3,639 | ($13,542) | ($9,904) |
| $75,000 to $100,000 | $19,026 | $15,387 | $3,639 | ($11,117) | ($7,478) |
| $100,000 to $200,000 | $19,026 | $15,387 | $3,639 | ($6,743) | ($3,110)) |
Non-Group – Head of Household
| Income | Premiums Under Reid Bill | Premiums Under Current Law | Premiums Increase | Subsidy | Net Premium Increase/Premium Subsidy |
| $0 to $10,000 | $19,026 | $15,387 | $3,639 | ($7,555) | ($3,916) |
| $10,000 to $20,000 | $19,026 | $15,387 | $3,639 | ($7,958) | ($4,139) |
| $20,000 to $30,000 | $19,026 | $15,387 | $3,639 | ($7,464) | ($3,825) |
| $30,000 to $40,000 | $19,026 | $15,387 | $3,639 | ($7,764) | ($4,125) |
| $40,000 to $50,000 | $19,026 | $15,387 | $3,639 | ($9,201) | ($5,562) |
| $50,000 to $75,000 | $19,026 | $15,387 | $3,639 | ($9,497) | ($5,858) |
| $75,000 to $100,000 | $19,026 | $15,387 | $3,639 | ($8,039) | ($4,400) |
| $100,000 to $200,000 | $19,026 | $15,387 | $3,639 | ($8,500) | ($4,861) |
Comparison of Premium Reduction and Tax Increase
Based on the projected cost of an average single and family health insurance policy in the small group and large group market in 2016, and based on CBO data on the average premium inflation rates under the Reid bill and current law, Finance Committee Republican staff projected the average cost for these plans in the small and large group markets in 2019. Staff then compared the premium changes with the average tax increase an individual or family would see based on JCT data. The below tables illustrate this comparison.
As we can see from the below tables, low-income individuals, families, and single parents between $0 and $20,000 (and in the case of a family policy in the large group market, between $0 and $30,000) are benefiting from the premium reduction, net of a tax increase. Individuals, families, and single parents with income between $20,000 and $200,000, however, are actually paying more, net of the premium reduction and tax increase.
Small Group – Single
| Income | Premiums Under Reid Bill | Premiums Under Current Law | Premiums Reduction | Subsidy | Tax Increase | Net Tax Increase/Premium Reduction |
| $0 to $10,000 | $9,130 | $9,130 | $0 | $0 | $31 | $31 |
| $10,000 to $20,000 | $9,130 | $9,130 | $0 | $0 | $99 | $99 |
| $20,000 to $30,000 | $9,130 | $9,130 | $0 | $0 | $202 | $202 |
| $30,000 to $40,000 | $9,130 | $9,130 | $0 | $0 | $325 | $325 |
| $40,000 to $50,000 | $9,130 | $9,130 | $0 | $0 | $377 | $377 |
| $50,000 to $75,000 | $9,130 | $9,130 | $0 | $0 | $576 | $576 |
| $75,000 to $100,000 | $9,130 | $9,130 | $0 | $0 | $681 | $681 |
| $100,000 to $200,000 | $9,130 | $9,130 | $0 | $0 | $726 | $726 |
Small Group – Family
| Income | Premiums Under Reid Bill | Premiums Under Current Law | Premiums Reduction | Subsidy | Tax Increase | Net Tax Increase/Premium Reduction |
| $0 to $10,000 | $22,469 | $22,637 | ($168) | $0 | $88 | ($80) |
| $10,000 to $20,000 | $22,469 | $22,637 | ($168) | $0 | $99 | ($69) |
| $20,000 to $30,000 | $22,469 | $22,637 | ($168) | $0 | $250 | $82 |
| $30,000 to $40,000 | $22,469 | $22,637 | ($168) | $0 | $452 | $284 |
| $40,000 to $50,000 | $22,469 | $22,637 | ($168) | $0 | $620 | $452 |
| $50,000 to $75,000 | $22,469 | $22,637 | ($168) | $0 | $743 | $575 |
| $75,000 to $100,000 | $22,469 | $22,637 | ($168) | $0 | $826 | $658 |
| $100,000 to $200,000 | $22,469 | $22,637 | ($168) | $0 | $1,060 | $892 |
Small Group – Head of Household
| Income | Premiums Under Reid Bill | Premiums Under Current Law | Premiums Reduction | Subsidy | Tax Increase | Net Tax Increase/Premium Reduction |
| $0 to $10,000 | $22,469 | $22,637 | ($168) | $0 | $0 | ($168) |
| $10,000 to $20,000 | $22,469 | $22,637 | ($168) | $0 | $55 | ($113) |
| $20,000 to $30,000 | $22,469 | $22,637 | ($168) | $0 | $521 | $353 |
| $30,000 to $40,000 | $22,469 | $22,637 | ($168) | $0 | $1,294 | $1,126 |
| $40,000 to $50,000 | $22,469 | $22,637 | ($168) | $0 | $1,755 | $1,587 |
| $50,000 to $75,000 | $22,469 | $22,637 | ($168) | $0 | $1,482 | $1,314 |
| $75,000 to $100,000 | $22,469 | $22,637 | ($168) | $0 | $1,114 | $946 |
| $100,000 to $200,000 | $22,469 | $22,637 | ($168) | $0 | $999 | $831 |
Large Group – Single
| Income | Premiums Under Reid Bill | Premiums Under Current Law | Premiums Reduction | Subsidy | Tax Increase | Net Tax Increase/Premium Reduction |
| $0 to $10,000 | $8,514 | $8,680 | ($166) | $0 | $31 | ($135) |
| $10,000 to $20,000 | $8,514 | $8,680 | ($166) | $0 | $99 | ($67) |
| $20,000 to $30,000 | $8,514 | $8,680 | ($166) | $0 | $202 | $36 |
| $30,000 to $40,000 | $8,514 | $8,680 | ($166) | $0 | $325 | $159 |
| $40,000 to $50,000 | $8,514 | $8,680 | ($166) | $0 | $377 | $211 |
| $50,000 to $75,000 | $8,514 | $8,680 | ($166) | $0 | $576 | $410 |
| $75,000 to $100,000 | $8,514 | $8,680 | ($166) | $0 | $681 | $515 |
| $100,000 to $200,000 | $8,514 | $8,680 | ($166) | $0 | $726 | $561 |
Large Group – Family
| Income | Average Premiums Under Reid Bill | Average Premiums Under Current Law | Premiums Reduction | Subsidy | Tax Increase | Net Tax Increase/Premium Reduction |
| $0 to $10,000 | $23,542 | $23,878 | ($336) | $0 | $88 | ($248) |
| $10,000 to $20,000 | $23,542 | $23,878 | ($336) | $0 | $99 | ($237) |
| $20,000 to $30,000 | $23,542 | $23,878 | ($336) | $0 | $250 | ($86) |
| $30,000 to $40,000 | $23,542 | $23,878 | ($336) | $0 | $452 | $116 |
| $40,000 to $50,000 | $23,542 | $23,878 | ($336) | $0 | $620 | $284 |
| $50,000 to $75,000 | $23,542 | $23,878 | ($336) | $0 | $743 | $407 |
| $75,000 to $100,000 | $23,542 | $23,878 | ($336) | $0 | $826 | $490 |
| $100,000 to $200,000 | $23,542 | $23,878 | ($336) | $0 | $1,060 | $724 |
Large Group – Head of Household
| Income | Average Premiums Under Reid Bill | Average Premiums Under Current Law | Premiums Reduction | Subsidy | Tax Increase | Net Tax Increase/Premium Reduction |
| $0 to $10,000 | $23,542 | $23,878 | ($336) | $0 | $0 | ($336) |
| $10,000 to $20,000 | $23,542 | $23,878 | ($336) | $0 | $55 | ($281) |
| $20,000 to $30,000 | $23,542 | $23,878 | ($336) | $0 | $521 | $185 |
| $30,000 to $40,000 | $23,542 | $23,878 | ($336) | $0 | $1,294 | $958 |
| $40,000 to $50,000 | $23,542 | $23,878 | ($336) | $0 | $1,755 | $1,419 |
| $50,000 to $75,000 | $23,542 | $23,878 | ($336) | $0 | $1,482 | $1,146 |
| $75,000 to $100,000 | $23,542 | $23,878 | ($336) | $0 | $1,114 | $778 |
| $100,000 to $200,000 | $23,542 | $23,878 | ($336) | $0 | $999 | $663 |
(photo credit: White House official photo by Sharon Farmer)