This October 25, 2016 photo shows a woman looking at the Healthcare.gov internet site in Washington, D.C. | Getty Obamacare repeal could be biggest 2017 tax cut for wealthy

The big winners in Republican plans to repeal Obamacare are likely to be the rich.

Rescinding the Affordable Care Act means not only taking away health coverage from some 20 million Americans. It also means scrapping two big tax increases Democrats imposed on the wealthy to help pay for it all.


Republicans are likely to ax those taxes on the earnings and investments of those making more than $250,000 — and not replace them — in what some predict will prove the biggest tax cut of next year.

“It means that there’s a large, permanent tax cut before we even get to tax reform,” said Ryan Ellis, former tax policy director for Grover Norquist’s Americans for Tax Reform.

“To me personally, that’s the best part about repealing Obamacare,” he said. “Because on the health care side of it, you have this complicated ‘replace’ that you have to turn to after that, but on taxes, it’s all easy — it’s all dessert.”

For those in the top 0.1 percent of incomes, repealing the investment tax alone would mean $154,000 in annual savings, according to the Tax Policy Center.

The contrast with low-income people losing coverage — which Republicans promise to replace with a yet-to-be defined Obamacare substitute — is likely to only stoke controversy over repealing the health law. Some Democrats argue the Republican plan amounts to a tax increase on low-income people, because Obamacare insurance subsidies take the form of refundable tax credits, though budget scorekeepers generally consider those to be spending provisions.

“One perspective on this bill will be that it’s a tax increase on working-class people and major tax cut for wealthy people,” said Chuck Marr, director of federal tax policy at the left-leaning Center on Budget and Policy Priorities. “This angle is going to get a lot more attention because it’s a clear juxtaposition.”

Republicans say they will replace the health coverage later, though there is no agreement on how or when. Vice President-elect Mike Pence met with lawmakers Tuesday to consider options.

But many Republicans, pointing to previous efforts to repeal the law, expect its tax increases will be gone for good.

“We’re having a discussion about what a repeal bill will look like, but I would say it would follow the contours, probably, of what we did” before, said Sen. John Thune, the chamber’s No. 3 Republican.

Earlier this year, Congress approved legislation vetoed by President Barack Obama that would have phased out his health care law while killing its tax increases.

Asked about complaints that Republicans are handing out tax cuts to the rich while taking coverage away from the poor, House Republican tax writer Tom Reed said: “What we're trying to do, from my perspective, is taking on Obamacare and what it’s doing to the insurance market and health care.”

“When you’ve got double-digit increases [in premiums] — if they want to defend the status quo when we’re trying to help people out — if they want to make it a political fight, that’s what this city is all about.”

Repealing Obamacare’s tax increases, which budget analysts put the neighborhood of $1 trillion, will also make Republicans’ tax-reform plans easier to finance.

That’s because it would effectively move the cost of doing things Republicans wanted to do anyway as part of tax reform into separate legislation. Killing the ACA’s investment tax, for example, will reduce the total capital gains tax to 20 percent, from the current 23.8 percent. That will make it cheaper to approve additional cuts.

More generally, it would make tax reform cheaper by changing the so-called “baseline.” When budget analysts estimate the cost of legislation, they compare it to what’s in current law. If they project the government will take in less revenue in the future, thanks to ACA repeal, it means less money Republicans have to make up as part of tax reform.

It’s important for Republicans to make sure tax reform is budget neutral because they want to use a tactic known as budget reconciliation to muscle it through the Senate, and the chamber’s rules prohibit such measures from adding to the long-term debt.

When the Tax Policy Center estimated in September that House Republicans’ tax reform plans would cost at least $2.5 trillion, they included the cost of repealing the ACA’s tax increases.

Scrapping Obamacare’s tax increases would make financing a replacement harder because Republicans would not be able to rely on the revenue they would generate.

Democrats financed the law with more than a dozen tax increases, with new levies on everything from medical devices to tanning salons to gold-plated health insurance policies.

But two of the largest were aimed at the wealthy: A surcharge on capital gains as well as dividends and interest income, and a surtax on their earnings, both of which took effect in 2013. Rescinding those two provisions would cost $346 billion, the official Joint Committee on Taxation said last year.

It’s conceivable that Republicans will be forced to delay the repeal of at least some of the tax increases, depending on how slowly they phase out the Obamacare coverage provisions, because of the Senate reconciliation rules. If delaying the repeal of some of the spending portions of the law throws their budget numbers out of whack, they would have to similarly delay striking the tax increases.

“That analysis is being done,” said Thune.