Taxes and the Penalty for not Having Health Insurance

As a part of its tax bill, the Senate is proposing to repeal the tax penalty currently paid by people without health insurance. According to the Congressional Budget Office (CBO), repealing the penalty will save 338 billion dollars over 10 years. Four million people would lose insurance right away and 13 million would lose insurance over the next 10 years. Over the next decade, premiums would be 10 percent higher each year than they would be if the penalty isn’t repealed.

Republicans are passing their tax bill under a process known as budget reconciliation (reconciliation). They are using reconciliation to avoid the filibuster and its 60-vote threshold. When reconciliation is used, legislation must comport with the Byrd Rule.

The House and Senate agreed to a 10-year budget reconciliation resolution that allows their tax bill to add 1.5 trillion dollars to the deficit over the next decade. Since their budget resolution runs for 10 years, the Byrd Rule mandates that in year 11 their bill cannot add to the debt.

Repealing the penalty is necessary to reduce the amount of money the tax bill will add to the debt.

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