Why Does Obamacare Repeal Have to Come Before Tax Cuts?

For indispensable reporting on the coronavirus crisis, the election, and more, subscribe to the Mother Jones Daily newsletter.


Yesterday I made fun of President Trump for not understanding why his tax cut plan would be easier to pass after Obamacare had been repealed. But I have a confession: I don’t really understand it either. Jon Chait’s explanation is typical:

The connection between the two issues might seem obscure, but it matters technically. The Republican plan to repeal Obamacare would eliminate all the taxes that were raised to help pay for the benefits — about $1.2 trillion over the next decade. This would lower the baseline of tax revenue, meaning that Republicans would need to design a tax code that raises $1.2 trillion less in revenue in order to be “revenue-neutral.” That makes it crucial for them to repeal Obamacare before they cut taxes.

I’ve read a whole bunch of explanations of why Obamacare repeal needs to come before tax reform, and this is the gist of all of them: It lowers the revenue baseline.

Fine. Using round numbers, suppose the tax code brings in $20 trillion over ten years. Once you repeal Obamacare, it brings in $19 trillion, so your shiny new tax plan only has to raise $19 trillion. Simple enough.

But what if you leave Obamacare in place? Now your new tax plan needs to raise $20 trillion. But $1 trillion is still coming from Obamacare, so you have to raise only $19 trillion ex-Obamacare. It’s the same. I can’t think of a chart to illustrate this, so instead here’s one showing actual federal tax revenues aside from payroll taxes:

What am I missing here? The fact that all the explanations I’ve read vaguely invoke the phrase “revenue baseline” and then move on makes me suspicious. Is there something deeper going on here? It doesn’t make sense that eliminating a roughly equal amount of revenue and spending by repealing Obamacare would have any effect on the deficit calculations of a subsequent tax bill. Could some grizzled expert please explain this?

DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily bluster—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily bluster—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate