Stopping Obama’s Time Bomb: The First Tax Increase of the Trump Era
This column by ACRU Senior Fellow and Policy Board member J. Kenneth Blackwell was published November 18, 2017 by Townhall.
In just six weeks, the first tax increase of the Trump era goes into effect, a delayed, time-released tax hike that President Obama left as a parting gift for his successor. You haven’t heard much about this tax increase because it was deliberately designed by Democrats to be hidden from those who ultimately pay for it and to go into place after Obama was out of office.
But the Democrats’ crafty implementation doesn’t make this new tax any less real, and now it’s up to Republicans to make sure it doesn’t go into effect on our watch.
Obamacare imposed hefty hidden new taxes on American-made medical devices and private-market health insurance policies. These taxes were suspended for 2017 by Congress and the Obama administration because even Democrats saw that they were harming job creation and causing steep premium increases. But the suspensions expire at the end of the year. Unless Congress acts soon, these taxes go back into effect January 1, 2018—-raising taxes by $15 billion next year alone and by hundreds of billions over the next decade. Yet most Republicans are doing nothing to stop it.
To be clear: the return of these currently suspended Obamacare taxes is a tax increase. Republicans are not only failing to repeal Obamacare; they are on the verge of resurrecting some of its most harmful provisions.
To make matters worse, these taxes directly target seniors, small businesses, and American manufacturing. This is a tax increase on the Trump Coalition.
Medical technology supports nearly two million American jobs, and the industry is actually a net exporter of its products, one of the few such sectors in the U.S. According to the medical device trade group, when the tax was suspended, 83 percent of medical technology companies reported increased investments in research and development.
Allowing the 2.3 percent medical device excise tax to return will put an additional burden on medical device innovators already struggling under America’s broadly uncompetitive manufacturing policies. This hopelessly flawed tax is assessed on all U.S. medical device sales—-regardless of whether the company is even profitable. Why on earth would Republicans allow the return of a tax that completely undercuts their messaging on reviving manufacturing, creating jobs and boosting growth?
More than 150 million Americans will see their premiums increase by about three percent in 2018 if Republicans choose to bring back the Obamacare health insurance tax. Three percent may not sound like much in an era of skyrocketing health care costs, but it translates to more than $500 per family. Moreover, the $500 premium increase caused by the return of the Obamacare tax will come on top of the many other factors that will inevitably drive up health care costs in 2018, such as soaring prescription drug costs.
So why isn’t the powerful insurance industry mounting a massive lobbying campaign against the return of this excise tax on its policies? Because insurers simply pass on the cost of the tax to their customers. The powerful insurance lobby has focused instead on securing a costly taxpayer-funded bailout from Obamacare. The remaining insurers in the dying Obamacare exchanges would rather receive corporate welfare checks that fatten their bottom lines than prevent a tax increase that harms their customers.
Despite the failed Obamacare repeal push, polling confirms that Republicans will own health care in the minds of voters next year. Perhaps Republicans failed to learn the painful lessons voters taught Democrats in 1994, 2010 and 2014? When you control both ends of Pennsylvania Avenue and approach health care on a partisan basis, you own the politics of health care.
Republicans could take a $500 premium increase on Republican voters off the table while supporting job creation by simply maintaining the current bipartisan moratorium of the Obamacare taxes. Yet far too many Republicans seem intent on allowing a tax increase on their watch. In fact, while looking the other way as Obamacare taxes return, some Establishment Republicans and are even joining Democrats in support of the Obamacare bailout.
In fairness, not all Republicans are standing idly by while Obamacare taxes return. Colorado Senator Cory Gardner, along with a number of conservative senators, is leading a spirited effort to prevent the return of the tax on health insurance. Many Republicans are supporting legislation to repeal the medical device tax. But time is running out.
Republicans campaigned on dual pledges of Obamacare repeal and no tax increases. Allowing a stealth tax from the Obama administration to be the first tax increase of the Trump era makes a mockery of both of those pledges. And Republicans in Washington wonder why they face a grassroots revolt. They need to step up now.