If congressional Republicans cut hundreds of billions of dollars from state and federally-financed Medicaid health insurance to pay for “tax cuts for billionaires,” Rhode island can, and should, offset its share of that potentially huge revenue loss by hiking taxes on the richest of Rhode Island’s rich.
Context: Medicaid spending in Rhode Island covers a third of the state’s population at a projected cost of $4.52 billion this year alone.
U.S. Rep. Seth Magaziner spelled out the political prospects for big Medicaid cuts by the GOP-controlled Congress during a morning Zoom meeting on April 15 sponsored by The Womxn Project, before heading off on the next event on a “sound the alarm” tour with U.S. Sen. Jack Reed and other top-ranked state Democrats.
The second event focused on the potential impact of 7,000 threatened staff cuts at the Social Security Administration.
Does Magaziner support an additional tax for RI’s top earners?
Outnumbered in Congress, this is what the members of Rhode Island’s all-Democrat delegation are now doing on a daily basis: sounding worst-case alarms and, in Magaziner’s case, walking into a campaign pitch for this year’s bill to levy a 3% surcharge on Rhode Island’s top-earners.
The proposed new 3% income tax surcharge would apply to taxable income above $625,000. Advocates hope the new tax would raise $190 million for Rhode Island from 5,700 high-end earners, which equates to about $33,000 more from each.
Magaziner did not endorse the tax hike pitched during the call by Nina Harrison, policy director for the Economic Progress Institute, and instead, through a spokesman, deferred to state leaders, adding that keeping all options on the table given the uncertainty around how significant Republican Medicaid cuts will be to the state budget was “correct.”
Magaziner instead spent his speaking time laying out the lay of the land in Washington.
“President Trump made a lot of promises during the campaign,” Magaziner said. “He promised to extend all of the tax cuts he passed in 2016, most of which either have expired or are about to expire. I’d say it was [a] mixed bag, but by and large, those 2016 tax cuts benefited the very wealthy and big corporations.”
Magaziner added that President Donald Trump’s promise to “get rid of taxes on tips,” as well as taxes on retirement income and Social Security “sounds good, but would be enormously expensive.”
“If we were going to do all of those things, it would cost about $6 trillion over 10 years,” Magaziner said. “Of course, he had no plan for how to pay for it.”
Magaziner describes potential plan to cut Medicaid
As Magaziner described it, the game afoot is to cast the tax plan as “revenue neutral,” by tying it to budget cuts, which would require only a majority vote for approval in the Senate instead of 60 votes. Trump and congressional Republicans, he said, claim they have taken three of the government’s top four expenses off the table for cuts: Social Security, Medicare and defense.
That, Magaziner said, “basically just leaves Medicaid.”
Magaziner said that, sometime in May, Republicans will release their plans to pay for the tax cuts through budget cuts and, while Congress hasn’t seen the plan, he said they can make some “educated guesses” about what they might be “based on the targets that they gave to each committee.”
The Energy and Commerce Committee, which oversees Medicaid, was given a target to cut $880 billion, he said. A cut of that magnitude would be “absolutely devastating” to the 75 million Americans, including 300,000 lower-to-middle income Rhode Islanders, on Medicaid.
Republicans are going after Medicaid, Magaziner speculated, because they are betting that “lower income people vote in lower numbers, so we might be able to get away with making big cuts to Medicaid.”
But “when you make big cuts to Medicaid, you’re not just hurting people who are on Medicaid, you are also hurting the health care providers for whom Medicaid is a big source of their revenue,” he continued. “Hospitals are going to take a huge financial hit, community health centers, behavioral health centers, nursing homes.”
Even if no one if “your family” is on Medicaid, a “family member’s nursing home could still shut down because of the big Medicaid cuts.”
Magaziner ran through the political math, leaving the possibility that the “15 or 20 Republicans in the House who come from purple districts” may balk, because they “understand that if they go forward with huge cuts to Medicaid, it could really hurt their reelection chances.” He also raised what he called an unlikely possibility: tax cuts for the middle class only, with a much smaller price tag.
“In the meantime,” he said, all “we can do is continue to be as vocal as we can. No cuts to Medicaid. No cuts to SNAP. We have to sound the alarm.”
When he stopped, Harrison from the Economic Progress Institute jumped in with her plug for the proposed 3% tax surcharge on Rhode Island’s top earners and a 1% assessment on health insurers.
The goals of the tax would be to plug a projected state budget deficit that may be “upwards of $220 million,” offset the potential federal Medicaid cuts and replace the “enhanced premium tax credits” passed by Congress to help these people just over the Medicaid limit be able to afford health insurance with state tax credits.
Raising taxes on the wealthy has been a goal of Rhode Island progressives and unions at least since the state’s top tax rate was lowered in 2010. Opponents contend the added tax would prompt the wealthy to flee, but advocates contend that has not happened in Massachusetts since it imposed its own 4% surcharge on income over $1 million in 2022.
