Repealing the ACA Will Bring Tax Relief

Over the last several election cycles, the majority of Republicans have campaigned for repealing the Affordable Care Act (ACA). With the GOP in the Oval Office and a majority in Congress, they now have the opportunity to follow through on their promises. Some have raised concerns about the “cost” of repealing this onerous law because it included even more new taxes than new spending. Policymakers need to consider the real-life costs imposed by the ACA’s numerous tax and regulatory burdens that have hit consumers’ wallets and stifled job creation.

Repealing the ACA would eliminate the employer mandate which has led small businesses to hire more part-time workers to avoid additional costs under the law, and the individual mandate that gave us the “individual shared responsibility payment.” Gutting the ACA will enact additional real tax savings averaging $58 billion per year.

Tax provisions repealed include:

Investment Tax: The ACA imposed an additional 3.8 percent tax on investment income of households earning a minimum annual income of $250,000. Taxable income includes a broad range of investments, royalties, rents, and property sales. In addition to the higher tax rates, it also increases complexity burdens on filers.

Cap on Flexible Spending Accounts (FSAs): Repealing the ACA would eliminate a cap that was imposed on the amount of money that employees can contribute to FSAs. The ACA reduced the contribution cap from $5,000 to $2,500 (it was inflation-adjusted to $2,600 in 2017). Repeal would also lift the ACA’s restriction on purchasing over-the-counter medicine through FSAs, Health Reimbursement Accounts, and Medical Savings Accounts. This helps reduce costs on basic medication that can help cut down on doctor visits.

Medical Devices Tax: The ACA imposed a 2.3 percent excise tax on manufacturers of medical devices, harming innovation and job growth in the industry. A 2015 law suspended the tax for 2016 and 2017.

Health Insurance Tax: The ACA levied unusual and complex tax on health insurance providers, though consumers ultimately bear the brunt of the costs through higher premiums. The tax assessment is based on each companies’ market share of total premiums collected in a year. The IRS estimates that insurance providers will spend over 18,000 hours each year reporting and filing this tax.

Chronic Care Tax: Individuals with high health care costs can deduct those expenses, but the ACA increased the threshold from 7.5 percent of Adjusted Gross Income to 10 percent.

Tanning Tax: This tax on indoor tanning salons has generated far less in revenue than originally estimated because of the damage done to the industry. Forbes reports that prior to the ACA there were over 18,000 salons, as of 2015 there were just 8,500.