Senator Amy Klobuchar speaking with supporters at a meet and greet at the Northside Cafe in Winterset, Iowa by Gage Skidmore
The wood
One of the issues at the heart of the current federal government shutdown is the expiration of certain tax credits.
When it became apparent that the Affordable Care Act (ACA) of 2010 had completely failed to provide affordable care, the premium tax credit was created in 2014. It provided financial assistance to lower- and middle-income Americans purchasing health insurance through the ACA marketplace. In 2021, the American Rescue Plan temporarily expanded the tax credits for two years, increased the amount of assistance, and eliminated the rule that prevented households with incomes over 400% of the federal poverty line from qualifying. As my colleague Matt Dean noted recently, “When the Inflation Reduction Act [IRA] passed in 2022, every Democrat in Congress voted for these subsidies to expire in 2025.” Indeed, the IRA “passed without a single Republican vote.”
Now that these subsidies are about to expire — exactly as Democrats wished in 2022 — they have changed their minds and decided to shut the federal government down until Republicans reverse a decision made by Democrats and vote to extend the “temporary” tax credits still further.
The trees
Minnesota’s own Sen. Amy Klobuchar has shared this story, illustrating what the expiration of these credits — which she voted for in 2022 — will mean for one couple if it actually goes ahead in 2025.
“The enhanced tax credits [in 2021] meant families like the Galls qualified,” CNBC reports.
The couple had a modified adjusted gross income of about $123,000 in 2023 and $136,000 in 2024, mostly from pensions and some from individual retirement account withdrawals, according to their tax returns.
If the temporary tax credits are not extended, they will no longer qualify.
Bill, who worked for more than 31 years in local and state government in Nevada and Idaho, said he expects their household to get pension income of about $127,000 in 2026, exceeding the 400% threshold.
In that case, CNBC continues:
Based on figures available through Idaho’s online insurance marketplace, Bill, 61, and Shelly, 60, expect to pay almost $1,700 in monthly health insurance premiums in 2026 if enhanced premium tax credits expire at the end of this year as scheduled. That sum — a nearly 300% increase from their current $442 premium — would add $15,000 a year to their household medical costs.
To avoid this, Sen. Klobuchar is demanding that the taxpayer cover the $1,258 a month via an extension of the tax credits which she voted to end in 2022. “Extending the enhanced subsidies would cost $350 billion over ten years, according to the Congressional Budget Office,” CNBC notes, adding, helpfully, “That’s an average of about $35 billion a year.” In January, the Congressional Budget Office forecast a deficit of $1.9 trillion in 2025, rising to $2.7 trillion in 2035.
What will happen if taxpayers do not pick up the Gall’s tab? “With significantly higher health premiums, the couple said, they would have to make tough financial and lifestyle decisions,” CNBC records, such as “traveling less.” Mr. Gall — who retired aged 58 in 2022, shortly after the tax credits were expanded — “could try to find part-time work.” “Early retirees such as the Galls…are perhaps ‘the most vulnerable population’ when it comes to expiring subsidies,” CNBC continues, because they “are too young to qualify for Medicare.”
The wood, again
I must confess to some surprise that Sen. Klobuchar chose to offer this family’s story as an example of the dire consequence of these temporary tax credits expiring as she wanted them to back in 2022. Perhaps, as the Republican vote gets, on average, less well off and less white and the Democrat vote gets, on average, better off and more white, she is simply catering to her base. Or, perhaps, she just has a tin ear. Either way, I do not think it will have the effect on public opinion she expects.
