With the Senate set to consider its first budget blueprint in four years, U.S. Senator Orrin Hatch (R-Utah) says that Senate Democrats are "cherry picking" a few tax expenditures as a means of trying to raise taxes on the American people, while ignoring the growing price tag of the premium subsidies -- tax credits to defray the cost of purchasing health insurance - in the President's health law.
According to an analysis by the Joint Committee on Taxation (JCT), these premium subsidies in the Patient Protection and Affordable Care Act (PPACA) will become the become the second largest health care tax expenditure by 2017, surpassing the exclusion for Medicare benefits and following the exclusion for employees that receive health insurance from their employer. The premium subsidies will also become the fifth largest overall tax expenditure.
Furthermore, according to an analysis by the Congressional Budget Office (CBO), the premium tax credit subsidies will become the largest refundable tax credit on the books by 2023, costing $169 billion a year -- hitting $1.2 trillion between 2013 and 2023.
"If we are going to have a debate on tax expenditures, let's have an honest debate. Let's not cherry pick a few to make a highly misleading political point. The reality is that the vast majority of these tax preferences aren't going to corporate jets or our energy sector, as Democrats would have you believe, they are increasingly flowing to government paid for health care," said Orrin Hatch, the Ranking Member of the Senate Finance Committee. "With more and more employers saying the cost of the President's health law could force them to stop providing health insurance to their employees, the cost of these subsidies will soar even further. This is the kind of debate we need to have with the American people since these tax credits are nothing more than spending through the tax code and since our debt is closing in on $17 trillion."
With more and more employers saying that could drop health insurance coverage for their employees, because of the health law, the cost of these subsidies is expected to rise even further with those employees having to turn to government health care coverage. PPACA forces employers with 50 or more full-time equivalent employees to provide health insurance for their employees in 2014 or face a massive tax increase. According to a study by the U.S. Chamber of Commerce, "A significant number [of business owners] reported the likelihood of canceling insurance coverage for employees, as paying the penalty would be less expensive for their company."
The premium tax credits are set to go fully into effect starting in 2014.
Below is the list of the top five health care tax expenditures by 2017:
Exclusion of employer provided health insurance and long-term care insurance: $171 billion;
Premium subsidies for health care under PPACA: $96 billion;
Exclude Medicare benefits from income: $81 billion;
Deduction for medical expenses and long-term care expenses: $17 billion; and
Deduction for health insurance premiums and long-term care insurance premiums by the self-employed: $7 billion.