The Baucus healthcare bill is causing some amount of confusion over ‘tax cuts’ of late.

In the modified chairman’s mark of the Finance Committee health bill (the Baucus bill) the proposal is to legislate $463 billion in tax credits.  This sounds like $463 billion in tax cuts, but it’s not: the Joint Committee on Taxation says that “72 percent of the exchange credit would be in excess of an individual’s tax liability.”  In other words, people would be getting more money than they owed.  Thus, it mostly isn’t a tax break, but a spending program.

As such, the CBO is going to score $333 billion of the credit as spending instead of tax relief ($130 billion lowers actual tax liability). 

Unfortunately, the confusion has come as Democrats have said that there will be $463 billion in tax credits, instead of admitting that much of their plan is actually spending programs that will require higher taxes if budget-neutrality remains a goal and further spending cuts are off the table.  (To see more examples of ‘refundable tax credits’ that are actually largely spending programs, click here and here.) Indeed, the chairman’s mark contains $404 billion in tax increases and $130 billion in tax credits (that actually reduce tax liabilities) for a net increase of $274 billion in taxes (which will be mostly paid by those making less than $200,000 a year.)

The Baucus bill would raise taxes by $274 billion.  Raising taxes is bad, but trying to hide it through complex spending programs is worse.