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One Certainty of G.O.P. Health Plan: Tax Cuts for the Wealthy

House Speaker Paul D. Ryan during a news conference on the American Health Care Act last week.Credit...Gabriella Demczuk for The New York Times

WASHINGTON — The House Republicans’ plan to replace the Affordable Care Act is messy and confusing. No one is sure exactly how Americans will be affected and how much more health insurance will cost them.

But there are two certainties. Their health care plan provides a tax cut for the wealthiest Americans. And it will make it easier for Republicans to pass more tax cuts this year. It could also be viewed by some people as a break from some of the populist campaign promises President Trump made to lift up the country’s “forgotten men and women.”

The Congressional Budget Office analysis of the Republican plan released this week revealed the full scope of the windfall that the legislation would bring. It offers billions of dollars’ worth of tax cuts to health insurers, pharmaceutical companies, investors and even tanning salon operators. The cuts amount to nearly $1 trillion over a decade. The beneficiaries would be the richest Americans who for years have complained that the Affordable Care Act unfairly burdened them with the responsibility of subsidizing insurance for the poor.

The repeal of the Affordable Care Act’s taxes is necessary for Republicans to move forward with an even more ambitious part of their agenda: tax reform. “Doing this first shrinks the amount of revenue they are going to have to raise to make their tax bill add up,” said Howard Gleckman, a fellow at the Tax Policy Center.

In order to get any tax overhaul through the Senate with a simple majority, the tax bill under Senate rules can’t increase the federal deficit. Since the health care bill would cut the federal deficit it makes it easier to come back later and pass more tax cuts.

“This dramatically helps us for tax reform,” Speaker Paul D. Ryan said on Fox News last week.

The Republican’s proposed health care legislation has met the inevitable backlash by Democrats. “This scheme will give billions upon billions of dollars in tax cuts to the most fortunate at the expense of the most vulnerable,” said Senator Ron Wyden, the Oregon Democrat who is the ranking member of the Senate Finance Committee. “It clearly and directly breaks the ‘Mnuchin rule’ promise that there would be no absolute tax cut for the wealthy, period.”

Steven T. Mnuchin, Mr. Trump’s Treasury secretary, gave assurances as recently as last month that “there would be no absolute tax cut for the upper class.” During Mr. Mnuchin’s Senate confirmation hearing, Democrats referred to the promise as the “Mnuchin rule.”

That tenet, critics say, has now been violated. And Speaker Ryan’s strategy has put some Republicans in an uncomfortable position of defending tax cuts for the rich after a year in which populist fervor spurred by income inequality upended American politics.

Whether the legislation, if passed, hurts Republicans in next year’s midterm elections remains to be seen. Democrats are already preparing to argue that Republicans are out of touch with working Americans, while Republicans insist that they are following through on their promises.

Republicans may have the harder time of it. A study by the Tax Policy Center, a nonpartisan research group, found that when the bill would take full effect in 2022, 40 percent of the benefits from the tax cuts would go to the richest one percent of the country. Those households would receive an average tax cut of $37,000, or 2.1 percent of their incomes. People in the lowest income bracket would get an average tax cut of $150, an amount that is just 0.9 percent of their earnings.

An analysis by The Upshot found that the provisions of the proposed health legislation could also be particularly painful to rural Americans, who do not benefit from competitive marketplaces for doctors, hospitals and insurers. Voters who supported Mr. Trump would be hit the hardest, receiving disproportionately small tax credits.

Companies and investors would see big benefits too. The Republicans’ plan removes $145 billion in taxes on health insurers, $158 billion on investment income for top earners, $25 billion on drug companies and $20 billion medical device companies.

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transcript

Fact Check: Republican Health Care Plan

President Trump is supporting a congressional plan that would change health care in the United States. We checked the facts.

How the Republican plan lowers premiums: It pushes out older people. https://www.nytimes.com/2017/03/14/upshot/no-magic-in-how-gop-plan-lowers-premiums-it-penalizes-older-people.html? The parts of Obamacare that Republicans would keep, change or discard: https://www.nytimes.com/interactive/2017/03/06/us/politics/republican-obamacare-replacement.html

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President Trump is supporting a congressional plan that would change health care in the United States. We checked the facts.CreditCredit...Doug Mills/The New York Times

While businesses in the health care sector have so far been skeptical of the health plan, the bill also comes with some sweeteners. One that has drawn particular outrage among defenders of the Affordable Care Act is a provision that would give health insurers greater incentives to give their executives raises by eliminating the health plan’s cap on compensation deductions.

Some of the gains for the most well off will come at the expense of the vulnerable. Health insurers will be allowed to once again increase premiums on older customers who are more likely to require medical services. Over the next 10 years, $880 billion in federal funding for Medicaid would be cut.

Democrats have seized on the tax cuts as evidence that Mr. Trump, who is aggressively pitching the health plan, is selling out his base and breaking campaign promises that he made to working class Americans. At one point during the campaign Mr. Trump said that the rich should pay more in taxes and that he would gladly do so.

“This is the type of class warfare that Democrats like to stir up,” said Ryan Williams, a Republican strategist and former spokesman for Mitt Romney, who made the case that tax reform would be the centerpiece of Mr. Trump’s legacy on taxes.

For its part, the White House so far appears undeterred by accusations that it is lavishing tax breaks on the rich.

“We promised at the outset that we were going to repeal all of the taxes,” Mick Mulvaney, the White House budget director, said on MSNBC on Tuesday, referring to the Affordable Care Act.

He added, “Who cares if somebody else benefits?”

A version of this article appears in print on  , Section A, Page 12 of the New York edition with the headline: One Certainty in Health Bill: Tax Cuts for Wealthy. Order Reprints | Today’s Paper | Subscribe

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