Washington, D.C. — A new Institute for Policy Studies report is the first to calculate how much American taxpayers have been saving from an Obamacare CEO pay reform that Republicans are proposing to eliminate.
Under Obamacare, leading health insurance corporations could deduct no more than $500,000 off their federal income taxes for the cost of each employee’s total compensation. The American Health Care Act, set to be voted on this Thursday in the U.S. House of Representatives, would eliminate this cap.
The IPS report, The CEO Pay Tax Break in the Republican Health Care Proposal, analyzes taxpayer savings from the Obamacare reform at the five largest U.S. publicly held health insurance companies in 2015.
- The ACA deductibility limits generated an estimated $92 million in additional public revenue in 2015 from just these five companies (Aetna, Anthem, Cigna, Humana, and UnitedHealth). On average, these corporations owed an extra $3.5 million in taxes per executive.
- This $92 million in savings from limiting pay-related deductions for just 26 executives is the equivalent of the average annual ACA premium subsidies for 28,500 Americans. It also far exceeds the cost of some of the programs President Trump is proposing to cut, such as the $70 million Emergency Refugee Assistance fund.
- The insurer that paid the most in federal taxes associated with their top five executives in 2015 was Cigna. The company paid an estimated $33 million more than they would’ve if the Obamacare deductibility cap had not been in place.
- These figures provide an incomplete picture of potential taxpayer savings. The deductibility cap covers all employees, but pay information is available only for each firm’s top five executives. Moreover, in 2015 the cap did not apply to $41 million in “grandfathered” stock options gains.
- The Joint Committee on Taxation estimates that eliminating the ACA cap would cost $400 million over nine years. The IPS calculations suggest this is very conservative. The CEOs of these five firms already hold outstanding stock options worth $94 million at current market values. Under the ACA cap, these firms would owe $94 million when these options become taxable. Without the cap, they would likely be fully deductible.
“Ordinary taxpayers should not have to subsidize excessive CEO pay,” says report author and veteran executive compensation analyst Sarah Anderson. “Instead of re-introducing this perverse loophole for health insurance companies, lawmakers should expand the Obamacare deductibility cap to all major U.S. corporations.”
The report notes that legislation to eliminate the “CEO Bonus Loophole” for all firms has been introduced by Democratic lawmakers in both houses (S. 82 and H.R. 399). These bills would save taxpayers an estimated $50 billion over 10 years.
Link to full report, including detailed data and methodology information: The CEO Pay Tax Break in the Republican Health Care Proposal
The Institute for Policy Studies (www.IPS-dc.org) is a 54-year-old multi-issue research center that has conducted path-breaking research on executive compensation for more than 20 years. The Institute’s first analysis of the Obamacare CEO pay reform, released in 2014, has received widespread media coverage, including in the Washington Post, LA Times, Fortune, CNBC, Reuters, WSJ Marketwatch, Marketplace, and the Intercept.
IPS also manages the website Inequality.org, which serves as a portal into all things related to the income and wealth gaps that so divide us. Twitter: @inequalityorg
For more information, contact:
Sarah Anderson, report author and Global Economy Project Director, Institute for Policy Studies, firstname.lastname@example.org, tel: 202 787 5227
Domenica Ghanem, Media Manager, email@example.com, 202-787-5205