President Trump is expected to release his fiscal year (FY) 2019 budget on February 12. The president is likely to renew his call to repeal the Patient Protection and Affordable Care Act’s (ACA) taxes. The FY 2019 budget may also ask for more IRS funding to help the agency implement the Tax Cuts and Jobs Act and tax incentives for infrastructure spending.
Progress to Date on Last Year’s Budget Proposals
In 2017, President Trump proposed a sweeping overhaul of the tax code in his FY 2018 budget blueprint. Much of what he proposed is included in the Tax Cuts and Jobs Act as Congress enacted nearly all of the president’s tax proposals.
One thing that the Tax Cuts and Jobs Act did not do, however, is tighten the Internal Revenue Service’s operating budget at the 4 percent level requested by the President in his 2017 budget proposal.
Affordable Care Act (ACA) Taxes
Obamacare, when passed in 2008, required substantial funding. A substantial amount of this funding came through a number of additional taxes, including additions to the tax liabilities of higher income taxpayers.
As has been well documented, the Tax Cuts and Jobs Act effectively repealed the ACA’s individual shared responsibility requirement but leaves untouched the employer shared responsibility requirement. The Tax Cuts and Jobs Act also does not repeal the ACA’s other taxes, including the net onerous investment income (NII) tax and the additional Medicare tax. These latter two axes add substantial tax liabilities for higher income taxpayers.
In approving a measure that continues funding the government, and as posted last week, Congress delayed but did not repeal three ACA taxes: the medical device excise tax, the health insurance provider fee, and the excise tax on high-dollar health plans. It is expected that President Trump will propose repealing these ACA taxes in his 2018 budget release.
In addition, and importantly, it is expected that he will also propose repeal of the net investment income tax and the additional Medicare tax. Finally, President Trump also is expected to call for elimination of the employer shared responsibility requirement.
The layers of tax required to facilitate funding at the outset of the ACA are extremely penal to higher income taxpayers and individuals who have income on their personal income tax returns from pass-through business entities. It had been hoped that these taxes would have been repealed as part of the Tax Cuts and Jobs Act but such was not the case due to funding limitations for other provisions of that act. However, repeal at this point in time, or soon, would provide affected taxpayers with important and welcome tax relief.