By Ryan Ellis
Big news tonight broken by Jennifer Haberkorn, Rachael Bade, and Josh Dawsey of Politico.
Over the weekend, the House conservative Republican Study Committee negotiated a series of rightward-directed improvements to the American Health Care Act (AHCA). According to Politico, one of those changes is a major upgrade in the tax policy side of the bill.
Under the version of the bill reported out by the House Ways and Means Committee, virtually all of the new or higher taxes in Obamacare would be repealed prospectively, as of January 2018. The improved bill now makes that tax relief effective retroactively, to January 2017.
Nowhere is this a bigger deal than for savers and investors. One of these Obamacare tax increases is the hated “net investment income tax” or NIIT. The NIIT slaps a 3.8 percentage point surtax on capital gains, dividends, interest, and almost all other yields on investment. That’s why our capital gains and dividends rate is 23.8 percent today.
The AHCA 2.0 eliminates the NIIT’s 3.8 percentage point surtax immediately and retroactively to the beginning of 2017. That is a powerful and immediate pro-growth shot in the arm to the investor class, a bullish down payment on fundamental tax reform, and is sure to excite the animal spirits of investors everywhere.
The more tax relief we get now, the easier it is to do fundamental tax reform later in the year–both from a tax policy and a tax revenue baseline perspective. Cutting the capital gains rate into the teens is a lot easier when you start at 20 percent than when you start at 23.8 percent.
If you’re still looking for a reason to support this bill, how does a retroactive tax cut on cap gains and dividends sound?
This retroactive tax cut also applies to the other tax hikes in Obamacare–the individual and employer mandates (already retroactively cut), the 3.8 percent Medicare payroll tax bracket, the tax hikes on health savings accounts (HSAs) and flexible spending accounts (FSAs), the medicine cabinet tax, the high medical bills tax, the tanning tax, and all the other list of horribles. Not only gone, but gone from New Year’s Day 2017 onward.
It’s time to get behind this bill. It’s a conservative win in so many ways, and it’s only getting better all the time.
Read more here.