Stopping Obama’s Time Bomb: The First Tax Increase of the Trump Era

Sen. Pat Toomey, R-Pa., center, joined by, from left, Sen. Rob Portman, R-Ohio, Sen. Tim Scott, R-S.C., and Senate Majority Leader Mitch McConnell, R-Ky., talks about the Senate Finance Committee's work on overhauling the nation's tax code, on Capitol Hill in Washington, Tuesday, Nov. 14, 2017.

By Ken Blackwell Published on November 18, 2017

In just six weeks, the first tax increase of the Trump era goes into effect. It’s a delayed, time-released tax hike that Obama left as a parting gift for his successor.

You haven’t heard much about this tax increase. That’s because it was designed to be hidden from those who end up paying for it. And it was designed to go into place after Obama was out of office. But the crafty mechanics of the Democrats’ new tax doesn’t make it any less real. And it’s now up to Republicans to make sure it doesn’t go into effect on our watch.

Obamacare imposed hefty hidden taxes on American-made medical devices and private-market health insurance policies. These taxes were suspended for 2017 because even Democrats saw they were harming job growth and causing steep premium increases. But the suspensions expire at the end of the year. Unless Congress acts soon, these taxes will go back into effect on January 1, 2018 — raising taxes by $15 billion next year alone and by hundreds of billions over the next decade. Yet most Republicans are doing nothing to stop it.

To make matters worse, these taxes target seniors, small businesses and American manufacturing.

To be clear: the return of these Obamacare taxes is a tax increase. Republicans are not only failing to repeal Obamacare, they are on the verge of bringing back some of its most harmful provisions.

Taxes That Oppose Republican Values

To make matters worse, these taxes target seniors, small businesses and American manufacturing. This is a tax increase on the Trump bloc.

Medical technology supports nearly two million American jobs. And the industry is one of the few in the U.S. that is a net exporter of its products. According to the medical device trade group, when the tax was suspended, 83 percent of MedTech companies saw increased investments in research and development.

Allowing the 2.3 percent tax to return will put an added burden on an industry already struggling under America’s uncompetitive manufacturing policies. This flawed tax is assessed on all U.S. medical device sales — regardless of whether the company is even profitable. Why on earth would Republicans allow the return of a tax that goes against their plan to revive manufacturing, create jobs and boost growth?

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If Republicans choose to bring this tax back, more than 150 million Americans will see their premiums increase by about 3 percent in 2018. That may not sound like much, but it translates to more than $500 per family. Moreover, the increase would come on top of the many other factors projected to drive up health care costs in 2018, such as soaring prescription drug costs.

Where are the Republicans?

So why isn’t the insurance industry mounting a massive lobbying campaign against the return of this tax? Because insurers simply pass the cost on to their customers. The insurance lobby has focused instead on getting a costly taxpayer-funded bailout from Obamacare. The insurers that still remain in the dying Obamacare exchanges would rather receive corporate welfare checks that fatten their bottom lines than prevent a tax increase that harms their customers.

Despite the failed Obamacare repeal push, polling confirms that Republicans will own health care in the minds of voters next year. Perhaps Republicans failed to learn the painful lessons voters taught Democrats in 1994, 2010 and 2014? When you control both ends of Pennsylvania Avenue and approach health care on a partisan basis, you own the politics of health care.

Republicans campaigned on dual pledges of Obamacare repeal and no tax increases. Allowing these taxes would make a mockery of both.

Republicans could spare voters a $500 premium increase, and support job creation, just by keeping the current bipartisan suspension of the Obamacare taxes. Yet far too many Republicans seem intent on allowing a tax increase on their watch. In fact, while looking the other way as Obamacare taxes return, some Establishment Republicans and are even joining Democrats in support of the Obamacare bailout.

Republicans Need to Step Up

In fairness, not all Republicans are standing idly by while the Obamacare taxes return. Sen. Cory Gardner, R-Colo., along with a number of conservative senators, is leading an effort against the return of the tax on health insurance. Many Republicans are supporting legislation to repeal the medical device tax. But time is running out.

Republicans campaigned on dual pledges of Obamacare repeal and no tax increases. Allowing a stealth tax from the Obama administration to be the first tax increase of the Trump era makes a mockery of both of those pledges. And Republicans in Washington wonder why they face a grassroots revolt. They need to step up now.

 

Ken Blackwell is a member of the Board of Directors of the National Taxpayers Union. He served as a domestic policy advisor to the Trump Presidential Translation Team.

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  • Char B

    This important. Thank you Mr. Blackwell.

  • Ken Anderson

    Thanks for bringing this out. This hidden tax by Obama/Pelosi democrats is insidious.

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