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How House and Senate Tax Legislation Affects Seniors

Tax legislation approved by Congress and signed into law by President Trump on December 22, 2017 (P.L. 115-97) will inevitably lead to the unraveling of working and middle-class programs to pay for massive tax cuts for the very wealthy and profitable corporations.  The following is a summary of how the new law will undermine the retirement and health security commitments made to generations of Americans.

Exploding the Budget Deficit Will Lead to Middle-Class Benefit Cuts

The tax law would leave Medicare, Medicaid and Social Security vulnerable to benefit cuts because of its dramatic $1.5 trillion increase at a minimum in the public debt an increase that will have to be offset in the future.  Inevitably, current and future generations of older Americans and people with disabilities will be forced to pay a heavy price for this irresponsible law.  Key supporters of the tax bill made clear their intent immediately after its approval.  Senator Marco Rubio (R-FL) said that the tax bill is just the first step before "…instituting structural changes to Social Security and Medicare…" benefits to reduce the federal deficit.  Similarly, House Speaker Paul Ryan (R-WI) said that “we’re going to have to get back next year [2018] at entitlement reform, which is how you tackle the debt and the deficit.”  In other words, the majority leadership will seek cuts to Medicare, Medicaid and Social Security benefits to pay for the deficits this tax law creates.

  • Medicare beneficiaries cannot afford to pay more for less coverage – particularly when half of them have incomes of less than $26,200 a year and spend 25 percent of their Social Security check to pay for Medicare Parts B and D out-of-pocket costs for premiums and cost-sharing amounts.

  • Regarding Medicaid, middle-class Americans often rely on the program for long-term services and supports when they exhaust their savings.  Nearly two-thirds of all nursing home residents’ care is financed in whole or in part by Medicaid.  In addition, Medicaid provides home and community-based services that allow seniors to stay in their homes.  The fiscal crisis created by the tax bill is likely to result in a trillion-dollar cut to Medicaid that will limit seniors’ access to long-term care services.

Repealing the Individual Mandate Undermines Health Security, Particularly for Older Adults

The new law will undermine the health security of seniors not yet eligible for Medicare by repealing the Affordable Care Act’s (ACA) individual mandate.  This will raise ACA marketplace plan premiums for older adults age 50-64 by an average of $1,500 in 2019, destabilize the individual health insurance market – prompting some insurance carriers to stop offering coverage – and, according to the Congressional Budget Office, increase the number of uninsured by 13 million people.

Chained CPI Hikes Taxes and Makes Social Security Vulnerable to COLA Cuts

P.L. 115-97 will require the use of the slower growth "chained" Consumer Price Index (CPI) to calculate increases in tax brackets and the standard deduction.  Replacing the current Consumer Price Index (CPI-U) with the chained CPI will result in higher taxes for all Americans, including seniors.

More significantly for seniors, now that the law requires the chained CPI to be used to index increases in tax brackets and deductions, supporters of cutting Social Security are likely use this precedent to demand that the chained CPI be also used to determine Social Security and Military and Federal Civilian Retirement cost-of-living adjustments (COLA).  As a result, the COLAs of current and future beneficiaries would be cut. 

  • According to the Chief Actuary of the Social Security Administration, three years after becoming law, calculating the COLA based on the chained CPI would decrease Social Security benefits by about $130 per year (0.9 percent) for a typical 65-year-old.  By the time that senior reaches 95, the annual benefit cut would be almost $1,400, a 9.2 percent reduction from currently scheduled benefits.

NATIONAL COMMITTEE POSITION

The National Committee will strongly oppose any effort to cut Medicare, Medicaid and Social Security benefits, especially to pay for the heinous $1.5 trillion cost of the new tax law.

Government Relations and Policy, January 2018


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