Trump’s Sudden Retreat on Obamacare

Plus, who gets hit hardest by IRS audits? By Yuval Rosenberg and Michael Rainey Trump Punts on Obamacare Replacement Until After 2020 Elections In a flurry of tweets Monday night, President Trump continued to criticize the Affordable Care Act but indicated that any new vote on a Republican plan to replace the law would wait until after the 2020 elections, essentially punting on a hot-button political issue he had resurrected just last week to the consternation of many Republicans. The Trump administration argued in a court filing last week that the entire Obama health care law should be ruled unconstitutional. Trump followed up on that filing by declaring that the GOP would soon be known as “the party of health care,” but his fellow Republicans were surprised by Trump’s push and generally [wary of reengaging]( in a fight that helped Democrats retake control of the House in the 2018 elections. And the [ensuing scramble]( made clear that the party [still doesn’t have an Obamacare alternative]( that it can coalesce behind, even as Trump [announced]( that GOP lawmakers would “come up with something really spectacular.” Senate Majority Leader Mitch McConnell (R-KY) [told reporters]( on Tuesday that he spoke with the president Monday and made clear that the Senate will not be taking up comprehensive health care legislation before the 2020 election. Trump’s tweets came after that conversation. White House Press Secretary Sarah Sanders [said]( Tuesday that the president "wants to work with Congress to come up with the right health care plan." She added that Trump is focused on protecting patients with preexisting medical conditions, making care more affordable and giving patients a say in the care that they receive. Why it matters: Trump appears to have accepted GOP calls that he hold off on a new Obamacare replacement effort and instead focus his reelection strategy on attacking Democratic Medicare-for-all proposals. That likely makes political sense, for now, especially since Republicans don’t have a plan — and even if they did have one, it wouldn’t have a chance of passing a divided Congress. It’s much easier to attack the Democratic plans, promise Americans will get “great health care” and leave the thorny details aside. Trump’s decision ensures that health care will be [front and center]( in the 2020 elections, though it alleviates some of the immediate pressure on Republicans to produce a plan. In the meantime, though, the Trump administration continues to support a lawsuit that could result in the Affordable Care Act being struck down — and 20 million Americans losing coverage — without providing an alternative. “In short,” writes Bloomberg columnist Max Nisen, “the GOP is gambling with the stability of the U.S. health-care system because its best health policy ideas can’t pass on their own merits.” The bottom line: The problem for Trump, New York magazine’s left-leaning columnist Jonathan Chait [says]( is that “the Republican party is structurally and endemically incapable of devising a health-care program that is remotely acceptable to the public. The reason, which has been amply demonstrated over the last decade, is that most people think ‘great’ health insurance gives everybody access to medical care. But paying for that care requires some combination of taxes and regulations on insurance, both of which violate conservative dogma.” Americans Borrowed $88 Billion to Pay for Health Care Last Year: Survey A new report from Gallup and the nonprofit West Health on [“The U.S. Healthcare Cost Crisis”]( includes some sobering numbers about the financial burdens created by the current system — and about Americans’ fears about the broader economic hit that could result from spiraling costs. “Relative to the quality of the care they receive, Americans overwhelmingly agree they pay too much, and receive too little, and few have confidence that elected officials can solve the problem,” Gallup says. - More than three in four Americans believe they pay too much for care relative to the quality of care they get. - Most Americans (64 percent) say they are “completely” or “mostly” satisfied with their own health care experiences, but that figure drops to 39 percent when they consider how the system serves Americans in general. - Americans borrowed an estimated $88 billion to pay for health care in the past year. Gallup estimates that 2.7 million Americans borrowed at least $10,000 and another 1.6 million borrowed more than $5,000. - Americans pulled an estimated $126 billion from savings to pay for health care in the past year. - Sixty-five million adults did not seek treatment for a health issue in the past year, and 15 million have deferred buying prescription drugs, because of the costs. - Forty-five percent of Americans, including a third of those earning more than $180,000 a year, are concerned that a major health issue could bankrupt them. - Given a choice between freezing health care costs for the next five years or a 10 percent boost to their household income, 61 percent said they prefer the freeze in costs. - Seventy-seven percent believe the government isn’t doing enough to keep prescription drugs affordable, while 74 percent say the same about health care costs in general. - Seventy-seven percent say they are concerned that health care costs will result do lasting damage to the U.S. economy. - About 70 percent of Americans say they [have no confidence]( in their elected officials to bring down health care costs via consensus legislation. The survey of more than 3,500 U.S. adults was conducted January 14 to February 20. A [separate Gallup survey]( released Monday found that health care tops the list of American’s worries for the fifth straight year, followed by federal spending and the budget deficit. Sen. Ron Wyden Proposes Annual Capital Gains Tax Sen. Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee, wants to change the way capital gains are taxed and impose an annual levy on investments. How it would work: While Wyden said details would come at a future date, the general idea is that investors would pay a tax based on valuations of their holdings each year, with all annual gains treated like income — even gains that have not been realized. This “mark-to-market” approach would tax all capital gains as income, at top rate of up to 37 percent. How it works now: Currently, capital gains are taxed only when an asset is sold. Year-to-year increases in value are not taxed as long as an investor continues to own a given asset, and in some cases, assets can pass to descendants without ever being taxed. When gains are realized, they are taxed at a special, lower rate that tops out at 23.8 percent. Who would be affected: Capital gains are concentrated in high-income households. According to the [Tax Policy Center]( “In 2016, capital gains were 46.4% of adjusted gross income (AGI) for those with AGI over $10 million, compared to 0.7% for those with AGI under $100,000.” Why the change? In a [statement]( Tuesday, Wyden framed the proposal as a way to reduce wealth inequality: “There are two tax codes in America. The first is for nurses, police officers and factory workers—those who earn wages and pay taxes with every paycheck. The second is for millionaires and billionaires—those who use their wealth to build more wealth, paying what they want, when they want. Everyone needs to pay their fair share and the best approach to achieving that goal is a mark-to-market system that would require the wealthy to pay taxes on their gains every year at the same rates all other income is taxed. This eliminates serious loopholes that allow some to pay a lower rate than wage earners, to delay their taxes indefinitely, and in some cases, to avoid paying tax at all.” What the critics are saying: Most agree that the proposal has little chance of passing any time soon, but it clearly would represent a significant change for the way wealth is taxed in the U.S. Lily Batchelder of NYU Law School [tweeted]( “Wow, this is a game changer” that would raise “a huge amount of revenue from the wealthy.” Her colleague David Kamin agreed, [saying]( the proposal “has potential to raise significant $$ and make it much harder for those at the top to avoid taxes.” But he also pointed to important, potentially thorny issues, such as how annual volatility would be treated and how non-liquid assets would be valued. David Miller, a tax lawyer, [told]( Bloomberg that in his estimate, a mark-to-market capital gains tax on the wealthiest households could raise hundreds of billions of dollars of revenue over 10 years. But the opposition to such a system would no doubt be intense. Sen. Pat Toomey (R-PA), dismissing the proposal as a “breathtakingly terrible idea,” [said]( it would go nowhere as long as Republicans were in a position to stop it. IRS Audits Hit the Working Poor, African Americans Harder Where does the IRS focus its audits in the U.S.? According to a new study by Kim M. Bloomquist, a former senior economist at the tax agency, the most heavily audited county is not, as you might suspect, New York County, home to Wall Street and many finance industry titans, or Santa Clara County, California, where Silicon Valley millionaires reside. No, the area with the highest audit rate is Humphreys County, Mississippi, and its residents are quite poor and disproportionately African American. Writing about the report at ProPublica, Paul Kiel and Hannah Fresques [say]( that the working poor are audited by the IRS at unusually high levels, and as a result, residents of rural counties in the South receive more attention from the tax agency than their fellow citizens in wealthier parts of the country. The reason? The working poor are more likely to claim the earned income tax credit, which is designed to boosting their incomes through tax rebates. But the IRS now audits EITC recipients “at higher rates than all but the richest Americans,” Kiel and Fresques say, citing a [ProPublica study]( published last year. As a result, the counties with the highest audit rates are poorer than average, and many have higher-than-average minority populations: “The five counties with the highest audit rates are all predominantly African American, rural counties in the Deep South. The audit rate is also very high in South Texas’ largely Hispanic counties and in counties with Native American reservations, such as in South Dakota. Primarily poor, white counties, such as those in eastern Kentucky in Appalachia, also have elevated audit rates.” Humphreys County attracts so much attention from the IRS because more than half of its taxpayers claim the earned income tax credit, the authors say. “Humphreys, with a median annual household income of just $26,000, is audited at a rate 51 percent higher than Loudoun County, Virginia, which boasts a median income of $130,000, the highest in the country.” Here's a map from the study showing the counties with the highest audit rates: [This should be fun to watch tonight.]( Send your tips and feedback to yrosenberg@thefiscaltimes.com. Or connect with us on Twitter: [@yuvalrosenberg]( [@mdrainey]( and [@TheFiscalTimes](. And please tell your friends they can [sign up here]( to get their own copy of this newsletter. 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