It’s Fix The Tax Code Friday!
As the Republican-crafted proposal to repeal and replace Obamacare makes it way through the House, one of the key pieces that has tongues wagging is a new, refundable tax credit. The tax credit is intended to replace the current premium tax credit.
Here’s how it would work. Those folks who do not receive health care insurance from an employer or from the government (think Medicaid) would be eligible for the credit. The purpose of the refundable credit, of course, is to offset the cost of buying healthcare insurance on your own.
The amount of credit you might qualify for under the proposal varies by age as follows:
- Younger than 30: $2,000
- Age 30 to 39: $2,500
- Age 40 to 49: $3,000
- Age 50 to 59: $3,500
- Older than 60: $4,000
The credit is capped per family (not per person) at $14,000. Phaseouts apply when income exceeds $75,000 for individuals ($150,000 for married couples). Under the proposal, you would lose $100 in credit for each $1,000 in income higher than those thresholds.
So, for example, a 25-year-old single person making $75,000 should qualify for the full $2,000 in refundable tax credit. A 25 year old single person making $85,000 should qualify for $1,000 in refundable tax credit ($2,000 less (10 x $100) = $1,000). A 25 year old single person making $105,000 would not qualify for the credit ($2,000 less (30 x $100) = less than 0).
(For more on the full health care proposal, check out this prior story.)
President Trump supports the use of the health care tax credit, saying in his joint address to Congress, “We should help Americans purchase their own coverage, through the use of tax credits and expanded health savings accounts — but it must be the plan they want, not the plan forced on them by the government.”
(You can read more about the joint address to Congress in our live blog coverage with annotations here.)
However, many conservatives oppose the tax credit on two principles:
- Refundable tax credits are notorious draws for fraud; and
- Many see no real difference between these tax credit and the subsidies under Obamacare (both, they argue are government entitlement programs).
The differences within the Republican party will, no doubt, be a central theme as the health care proposal goes to the House floor.
That, of course, brings us to today’s Fix The Tax Code Friday question:
Do you support the use of a new, refundable tax credit as a replacement for the current premium tax credit?
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