Monday marked the beginning of Senate driven tax reform. President Trump sent out a tweet, from Asia, which brought one of his many nemeses, Obamacare (or else known as the Affordable Care Act), back into the spotlight. Urging a scrap of the mandate that requires Americans to pay a penalty tax for not purchasing health insurance, he continued his crusade against the ACA, one tweet at a time. Bloomberg reported that this move would save the government over $338B over the next decade, but also leave about 13 million more Americans uninsured.
It will also raise premiums by about 10%, according to the Congressional Budget Office. Clearly, this benefits American insurers, at the cost of the American middle class. Is this the price that President Trump seems willing to pay for 300 odd billion dollars? For a Senate planning to raise the federal deficit by $1.5T, this amount could come in handy. But at what cost? Amid the many predicted, expected and feared financial ramifications of American tax reform, even Wall Street confessed to Bloomberg, on what axing an Obamacare mandate would do to help or harm the tax bill.
Alongside wanting to scrap the ACA mandate, Trump would also like to cut the top rate for high earners down by 4.6%, to 35%. The Senate wants to bring it down modestly, from 39.6% to 38.5%, while the House wants to keep it status-quo. Heavily criticised by Democrats as giving ‘easy breaks’ to the rich, Trump’s tweet which combines the repeal of the ACA mandate alongside this top tax rate cut. The intended winners seem to be multinationals and the top earners, and Democratic leader Mr. Chuck Schumer said this about the proposed reform that,
“…it is focused on the wealthy to the exclusion of the middle class.”
Read this and more at Reuters, as there are plenty more risks ahead for American tax reform.
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