The Corner

Economy & Business

The Senate Tax Reform Would Not Raise Taxes on the Poor

For more than a week now, some media outlets have been running wild with “distributional tables” from the Joint Committee on Taxation and the Congressional Budget Office claiming that — as a CNN headline last night put it, though the story itself was much better — “Poor Americans would lose billions under Senate GOP tax bill.”

This is entirely an artifact of how the agencies approach the individual mandate, which the bill repeals. They think a lot of lower-income Americans won’t buy health insurance absent a requirement that they do so, and that as a result these individuals will get less in government subsidies. As Nicole Kaeding of the Tax Foundation put it, “Less of an advanceable refund from the Treasury results in the appearance of a tax increase.” She pointed out that the JCT itself had released a separate table that excluded the effects of repealing the mandate and showed, unsurprisingly, that all income groups got a tax cut.

We now have such a table from the CBO as well. Through 2025, after which point the individual tax cuts expire (though they’ll likely be renewed by a future Congress), all income groups see a tax cut.

Importantly, the coverage losses from mandate repeal in the CBO’s (and by extension JCT’s) analysis seem to come mainly from people choosing not to buy insurance when they’re not forced to, as opposed to not buying it because premiums went up — though that does play a role too, because the people opting out will be disproportionately healthy. (As Ramesh Ponnuru has pointed out, much of the drop comes from Medicaid, which is essentially free to those who enroll.) It is not a tax increase to stop forcing people to take a government benefit.

There are problems with the Senate bill, including that it would add to the deficit, that the expiration of the individual tax cuts is a gimmick designed to make the revenue loss look smaller than it is, that it would increase the number of uninsured (which is problematic even if they choose it), and that it puts the individual health-insurance market at risk. But no, the GOP didn’t somehow manage to write a $1.4 trillion tax cut that raises taxes on the poor in any meaningful sense. Even they’re not that bad at what they do.


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