taxes

Reporting from Washington — As they wrestle with how to replace the Affordable Care Act, Senate Republicans face a critical choice between cutting taxes or preserving health coverage for millions of Americans, two competing demands that may yet derail the GOP push to roll back the 2010 healthcare law.

House Republicans, who passed their own Obamacare repeal measure this month, skirted the dilemma by cutting both taxes and coverage.

Their bill — embraced by President Trump — slashed hundreds of billions of dollars in taxes, a key goal of GOP leaders and the White House as they seek to set the stage for a larger tax overhaul later this year.

At the same time, the House legislation cut more than $1 trillion in healthcare assistance to low- and moderate-income Americans, a retrenchment the nonpartisan Congressional Budget Office estimates would nearly double the ranks of the uninsured over the next decade to more than 50 million.

In the Senate, coverage losses on that scale are worrisome to many rank-and-file Republicans whose states have seen major coverage gains under Obamacare. That makes the preservation of benefits one of the biggest challenges confronting Senate Majority Leader Mitch McConnell (R-Ky.) and other GOP leaders.

“Coverage matters,” Sen. Bill Cassidy (R-La.) said last week on MSNBC’s “Morning Joe” program, noting the importance of preserving Medicaid spending in the current law. “To someone [who] is lower-income, you’re going to need those dollars to cover that person.”

Yet moderating cuts to Medicaid and other government health programs without driving up budget deficits could force Republican senators to also dial back the tax cuts that many in the GOP want.

“It’s not that complicated. … If you want to use money for tax reform, you can’t have it for health coverage,” said Gail Wilensky, a veteran Republican health policy expert who ran the Medicare and Medicaid programs under President George H.W. Bush. “You can’t do both.”

McConnell convened a group of GOP senators — quickly panned for including only white men — to develop Obamacare replacement legislation, though the panel largely excluded Republican lawmakers who are most concerned about coverage, including Cassidy. McConnell has since said that all Senate Republicans would be involved in developing an Obamacare replacement.

The trade-off between cutting taxes and preserving Americans’ health protections reflects, in part, the legislative procedure that congressional Republicans have chosen to repeal the Affordable Care Act.

That process, known as budget reconciliation, allows Senate Republicans to pass their Obamacare repeal with a simple majority, rather than the 60-vote super-majority that is usually required to pass controversial legislation. (Republicans have only a 52-48 majority in the Senate.)

But to qualify for budget reconciliation under Senate rules, the bill must reduce the federal deficit over the next decade.

Tax cuts alone typically do the opposite, driving up budget deficits.

The tax cuts in the House Republican healthcare bill total more than $600 billion over the next decade, according to independent analyses by the Congressional Budget Office and the congressional Joint Committee on Taxation.

They include most of the major taxes enacted in the 2010 health law to fund the law’s program for extending health insurance to more than 20 million previously uninsured Americans.

On the chopping block are taxes on medical device makers and health insurance plans, which together account for about $165 billion in tax cuts over the next decade.

Couples making more than $250,000 a year (and single taxpayers making more than $200,000) would see two tax cuts, including one on investment income, that the budget office estimated would cost the federal government nearly $300 billion over the next decade. (That estimate may be revised down as House Republicans delayed one of the tax cuts in the final version of their bill.)

Also eliminated would be a host of limits on tax-free spending accounts that many Americans use for medical expenses. Republicans argue these taxes are unnecessary and even undermine efforts to control healthcare costs.

“It’s bad for economic growth,” House Speaker Paul D. Ryan (R-Wis.) told Fox News during the House debate.

The tax on health plans, for example, is widely seen as contributing to higher premiums, as insurers customarily pass the costs along to consumers.

But eliminating so many taxes isn’t cheap.

So the Republican healthcare bill — known as the American Health Care Act — slashes hundreds of billions of dollars in federal healthcare spending, including an estimated $880 billion in federal money for Medicaid, the state-run government health plan for the poor that currently covers more than 70 million Americans at any one time.

That would in effect cut federal Medicaid spending by more than a quarter over the next decade, an unprecedented reduction that independent analyses suggest would force states to sharply limit coverage for poor patients.

The House bill would also reduce insurance subsidies now available to low- and moderate-income Americans who get health plans through Obamacare marketplaces such as HealthCare.gov.

The reduction in federal aid would, in turn, dramatically increase the number of uninsured Americans. Overall, the Congressional Budget Office has estimated that 24 million fewer people would have health coverage by 2026 under the original version of the House bill.

By contrast, the wealthiest Americans stand to get a large tax break. By 2023, families making more than $1 million would see their taxes decrease by an average of more than $50,000, an analysis by the independent Urban-Brookings Tax Policy Center suggests.

That means that in a country of more than 300 million people, nearly half of all the tax breaks in the House healthcare bill would go to only about 780,000 households.

The combination of tax breaks for wealthy Americans and historic reductions in assistance to low-income patients has fueled widespread criticism of the House GOP healthcare legislation, particularly on the left.

“The math is pretty clear,” said Edwin Park, vice president for health policy at the liberal Center on Budget and Policy Priorities. “They are sharply cutting Medicaid and insurance subsidies to pay for tax cuts.”

Whether GOP senators will be able to moderate the reductions in healthcare assistance remains unclear.

The early version of the House bill was projected to reduce the federal deficit by about $150 billion over the next decade, according to the Congressional Budget Office analysis.

That number has likely shrunk slightly, as House Republicans added more spending to the legislation before it passed last week. An updated budget analysis is expected next week.

But under the budget rules adopted by GOP lawmakers this year, Senate Republicans will not be able to add any spending into their legislation without enacting cuts elsewhere or shrinking the tax cuts further.

That is because according to those rules, their bill must reduce the deficit by as least as much as the House bill.

Obamacare vs. Trumpcare: A side-by-side comparison of the Affordable Care Act and the GOP’s replacement plan »

Obamacare 101: A primer on key issues in the debate over repealing and replacing the Affordable Care Act. »

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London, United Kingdom – David Lesperance, a Canadian wealth adviser based in Poland, is working against the clock for one of his British clients.

John*, who requested anonymity, is trying to relocate from London to Dublin, the Irish capital, ahead of November 26, when Chancellor Rachel Reeves will deliver the budget – a statement presenting the Labour government’s plans for public finances for the year ahead.

Having built a company worth around 70 million pounds ($92m) that he plans to sell soon, John wants to avoid a hefty capital gains tax bill.

As his children are in university, upping sticks is possible. He hopes to take advantage of the Republic of Ireland’s non-domiciled, or “non-dom”, tax regime, which would exempt him from Irish taxes as well.

“We’ve been moving fast to organise his immediate departure to Ireland,” said Lesperance, who has been assisting him in shifting his assets abroad. “With higher taxes looming, the costs of leaving early are a rounding error.”

John is not alone.

The footballer Rio Ferdinand has recently moved to Dubai, citing tax as a push factor, while Egyptian billionaire and Aston Villa co-owner Nassef Sawiris, who moved his residency to Italy and the United Arab Emirates from Britain, told the Financial Times earlier this year that everyone in his “circle” is considering moving.

Herman Narula, the 37-year-old British Indian founder of Improbable, a tech company, announced this month that he is fleeing to Dubai. Worth about 700 million pounds ($920m), he is said to be Britain’s richest young entrepreneur. Among his reasons for fleeing were reported plans by the Labour government to impose an exit tax on wealthy people leaving the United Kingdom.

While that proposal appears to have been ditched, the overall business environment for entrepreneurs is increasingly unpredictable, Narula and a few others say.

“There is alarming evidence that some entrepreneurs are leaving the UK,” reads a recent open letter to Reeves, signed by more than a dozen wealthy business owners, including Nick Wheeler, founder and chair of the men’s clothing retailer Charles Tyrwhitt, and Annoushka Ducas, a jewellery designer.

“As the government prepares for this year’s Budget, it must carefully consider the cumulative impact of these policies on entrepreneurs,” the letter warns.

When the budget is delivered, all eyes will be on any changes to taxation – an issue affecting everyone in the UK. In recent months, speculation about tax amendments on property, incomes and pensions has repeatedly made headline news.

Rumours about the superrich abandoning the UK have been swirling for an even longer period, triggered by the mere prospect of a Labour government last year. Since the Keir Starmer-led government was elected last July, a range of media outlets have homed in on case studies suggesting that Labour is driving wealth out.

The first Labour budget last October outraged some high-earning individuals in the UK, who said they were already taxed too much.

“Last year’s Budget measures, including changes to Capital Gains Tax, Entrepreneur’s Relief, and Employer National Insurance, have increased costs for many entrepreneurs and enterprises,” read the recent open letter from wealthy business owners to Reeves.

Those changes came after the Conservatives abolished the non-dom regime, a status that allows for people with a residency abroad to avoid taxes in the UK.

But experts have offered words of caution on the supposed flight of the rich.

There is no official data on the number of wealthy individuals leaving because of Labour’s tax changes.

“The most recent tax data on wealthy individuals with non-dom status from HMRC [His Majesty’s Revenue and Customs, the UK’s tax revenue department] shows that the number of non-doms leaving the UK is in line with or below official forecasts,” said Mark Bou Mansour, an advocate at the Tax Justice Network.

Claims that recent revenue-boosting tax reforms have triggered a massive non-dom exodus are false and part of a wider rhetoric that is detrimental to the UK’s fiscal and economic health, he said.

“Talking about whether the superrich will move if we tax can be a distraction from talking about the harms to economies and democracies that arise from not taxing extreme wealth,” he said.

Mansour pointed to a 2024 study by the London School of Economics that interviewed a number of wealthy individuals. It found the most important factors underpinning their reluctance to migrate were their attachment to the capital’s cultural infrastructure, private health services and schools, and the ability to maintain social ties.

“There’s plenty of strong evidence showing that the superrich don’t choose to relocate just to pay less tax,” said Mansour.

Behind a large number of articles predicting an exodus of wealthy people was a report by the passport advice firm Henley & Partners.

However, the report was found to be based on flawed methodology, and was later amended.

Even so, Lesperance said he has worked with a number of clients who have left the UK since Labour came into power.

He argued that while not necessarily large in number, the group makes up a high percentage of overall tax revenue raised by the government.

“The tax contribution of a non-dom is about 220,000 pounds ($289,000) a year, which is about six or seven times the UK average,” he said, “They’re super contributors” who need to be protected, or else, “You’re going to actually see a drop in annual tax collections because these people have left.”

Some of his clients have chosen to relocate to Milan and Dubai.

“As one of my clients said, ‘London’s nice, but it’s not that nice,’” he said.

But Michelle White, head of private office at UK wealth management firm Rathbones, said that while her clients are internationally mobile and could move away, the majority have stayed put so far.

“Since some of these articles started coming out saying the floodgates are open, we haven’t seen that,” she said.

Britain’s schools, legal system and business environment continue to be pull factors, she argued.

Those who have left usually have ventures or properties abroad and can easily relocate, or are considering selling their business in the next two years or so, and do not want to pay capital gains tax on sales.

Others have big payouts from private equity or hedge funds and want to avoid paying income tax.

“It means that they’ll go and spend more time somewhere else and less time here in order to not pay UK tax on that sale,” said White.

A large extent of her clientele in the end decides to stay in the UK to raise families, and mitigates taxation through smart planning.

“I tell people to look at the next 50 years and plan taxes around that,” she said, “People take a long view.

“Tax is one thing, but quality of life and how you actually want to live as a family often overrides the tax aspect.”