The Individual Mandate’s Tax Troubles

The federal government keeps arguing that the individual mandate to purchase health insurance in last year’s health care law is constitutional because it’s a tax. Judges, even those who’ve ruled in favor of the mandate’s constitutionality, keep disagreeing with them. Every single one of the decisions related to the constitutionality of the mandate has affirmed that, despite the government’s arguments to the contrary, the mandate is not a tax—and therefore cannot be constitutionally justified by Congress’s taxing power.

Despite giving the mandate a stamp of approval, yesterday’s 6th Circuit ruling agreed on the tax issue. The distinction is important: Taxes are primarily designed to bring the government tax revenue. But the Obama administration’s legal position is that the portion of the mandate that counts as a tax is the penalty paid by those who fail to comply. The mandate’s penalty functions primarily as a regulation: It’s intended to control behavior, not raise money.  

And as Circuit Judge Jeffrey Sutton explained in a concurrence to yesterday’s ruling, if the government had clearly structured the mandate as a tax, it probably would have been easier to justify constitutionally:

It is easy to envision a system of national health care, including one with a minimum-essential-coverage provision, permissibly premised on the taxing power. Congress might have raised taxes on everyone in an amount equivalent to the current penalty, then offered credits to those with minimum essential insurance. Or it might have imposed a lower tax rate on people with health insurance than those without it. But Congress did neither of these things, and that makes a difference.

The difference is not merely legal. The law’s backers worked hard to avoid publicly calling it a tax during the year-long debate prior to passage. When asked whether he believed the mandate was a tax, President Obama replied unequivocally: “I absolutely reject that notion.” Congress also wrote it into the law as a penalty, not a tax, so as not to be accused of raising taxes. Nevertheless, as soon as the case went to court, the Obama administration's lawyers were quick to embrace the tax argument

It’s also true that, during the health care debate, many of the law’s critics argued that the mandate was effectively a new tax. But that argument was different than the one now being made by the Obama administration. Instead of arguing that the penalty for failing to comply with the mandate was a tax, critics of the law argued that the insurance purchase requirement itself constituted a new form of taxation.

Think of it this way: If the government decided to collect new revenue from businesses and individuals explicitly for the purpose of using that revenue to pay private insurers to provide Americans with health insurance, then it would be certainly be understood as a tax. (This approach would also have revealed the law’s true, far higher cost by forcing the Congressional Budget Office to score the cost of those premiums.)

ObamaCare’s mandate avoids this only by requiring Americans to pay that same premium revenue to private insurers directly, without the government intermediary. For constitutional purposes, it’s clearly not a tax. But for those required to pay, the effect is much the same.

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  • Barack Obama||

    It's a tax, but at the same time, it's not a tax. You'll do well in the grand new society if you just try and accept it as truth.

    2+2=5.

  • ||

    It's a war, but not a war. It's a tax, but not a tax. It's a recovery, but not a recovery.

    Hey, I think I'm seeing a pattern.

  • ||

    It isn't a pattern.

  • ||

    like

  • ||

    Pattern? Like a crazy quilt?

  • ||

    Exactly. Made of ties from the 70s.

  • Spencer||

    I think I saw that in the clouds when I used to take acid.

  • ||

    Lucy in the Sky With Ties On.

  • Jame Gumb||

    It rubs the lotion on its skin.

  • ||

    So what will they make out of the excess material?

  • Spencer||

    No, they will create a factory to make retro ties in order to send them to the factory that will make this quilt. That's the stimulus at work!

  • ||

    "It rubs the lotion on its body."

  • ||

    Since when have we been required to pay 'taxes' to non-government agencies?

  • Barack Obama||

    I require you to pay taxes to big insurance companies, and Michael Moore still claims that I'm for the working-class.

    HOLY FUCKING HELL, DO YOU FUCKERS NOT REALIZE HOW FUCKING EVIL I AM? DO YOU?...DO YOU?!

  • Spencer||

    you are kind of a dick.

  • ||

    Sorry, we must suspend you from commenting on this blog. Turn in your employee ID and official Hit & Run posting pen.

  • Spencer||

    I humbly apologize for saying what I thought.

  • ||

    Obama forgives you.

  • ||

    "My motives are ulterior...My soul is terrifying."

  • ||

    Well they did say we'd have to pass it to find out whats in it. Maybe we also had to pass it to figure out what the hell it was.

  • Lion||

    Man, that comment was just like the time we were all gathered around the kill, and someone told a leopard joke, and I laughed so hard an antler came out my nose.

  • Mainer||

    When asked whether he believed the mandate was a tax, President Obama replied unequivocally: “I absolutely reject that notion.” But as soon as the case went to court, his administration's lawyers were quick to embrace it.

    This just in, Barack Obama is a mendacious fuck.

  • Obama||

    mendacious fuck?
    I told you I was a man, Mainer!

  • Mark Halperin||

    careful.....

  • ||

    I believe his supporters like to refer to it as "nuance".

  • Paul||

    Taxes are primarily designed to bring the government tax revenue. But the Obama administration’s legal position is that the portion of the mandate that counts as a tax is the penalty paid by those who fail to comply. The mandate’s penalty functions primarily as a regulation: It’s intended to control behavior, not raise money.

    Ok, NOW cue the usual commenters making their "it's a tax" argument.

  • MNG||

    The tax code is commonly used to control behavior through vast numbers of exemptions, penalties, etc. So the claim that it must not be a tax because it is used to control behavior is a distinction without a difference. It is all constitutional anyway under Commerce Clause jurisprudence.

  • ||

    Why does the govt bother to keep making the tax argument? Just to kill treez?

  • ||

    The sustainable overharvestation of timber has created/saved over one billion American jobs!

  • Art-P.O.G.||

    Is this the real MNG or a spoof? And what can't the Commerce Clause do, again?

  • MNG||

    MNG|6.30.11 @ 1:17PM|#
    This is a spoof guys, remember school is out for summer.

    reply to this

  • ||

    Kneel down, kneel down to the mystery clause.
    Kneel down, kneel down to the mystery clause.
    Kneel down AND THAT'S SOME LEGISLATION, kneel down to the mystery clause.
    Kneel down TO MAKE SOME LEGISLATION, kneel down to the mystery clause.
    The magical mystery clause is waiting to take you away,
    Waiting to take you away.

  • ||

    So, anything that the government does to control behavior through, in part, financial rewards and penalties is permissible under the taxing authority?

    Kinda makes you wonder why they bothered with the whole "limited, enumerated powers" thing, doesn't it?

    So, if the feds were to say, I dunno, you may not have a gun within 500 feet of a school or you become subject to the Taxes in School Zones Tax of [evil pinky to mouth] $1 million dollars, that's copacetic?

    Or, perhaps, that if you don't consume a pound of broccoli a day, etc.?

  • MNG||

    This is a spoof guys, remember school is out for summer.

  • MNG||

    Oh yeah, JOOOS!!!

  • MNG||

    Yes, the kid's are alright.

  • ||

  • ||

    "The tax code is commonly used to control behavior through vast numbers of exemptions, penalties, etc.

    Such as?

    The taxes on alcohol and tobacco are intended to raise revenue. Sure, it can be argues that they serve the purpose of reducing consumption of the item being taxed, but that is not the stated legislative purpose.

    Also, taxes are a cost or benefit imposed on individuals engaging in a certain activity, not on those individuals who don't engage in a behavior.

    Those who choose to smoke pay the tax. Individuals who purchase a "green" car, get a tax break. The "tax" associated with the individual mandate would amount to taxing people who don't drive "green" cars.

  • MNG||

    You're still arguing with the spoof after it being pointed out? WTF?

  • cmace||

    You're the spoof.

  • MNG||

    The debate just got elevated from 1st to 3rd grade.

  • ||

    That's like five years of school for some of us.

  • Sir Roderick Glossop||

    The spoof is too close to reality.

  • Brian Combs||

    The spook is a lie.

  • Paul||

    So the claim that it must not be a tax because it is used to control behavior is a distinction without a difference.

    Except that taxes which are ostensibly used to control behavior still serve the primary purpose of generating revenue-- revenue paid directly to the government.

    Reset, try again, MNG.

  • MNG||

    MNG|6.30.11 @ 1:17PM|#
    This is a spoof guys, remember school is out for summer.

    I never set it, so I can't reset it.

  • Spencer||

    so, are you accusing the youth of lampooning you or teachers?

  • Anonymous Coward||

    So it's fine, except when it's a tax?

  • Anonymous Coward||

    So it's A fine, except when it's a tax?

    *cuts off offending digit*

  • Mainer||

    This whole argument makes me wish some grown up would come into the house and say, alright you kids, stop fucking with the Constituion and go to your rooms.

  • mr simple||

  • Mainer||

    That is awesome. I wish it was satire.

  • Black people||

    Okay, now that we've gotten your attention, we'll offer you a deal.

    We'll vote Republican in 2012, if you give us...let's say...$50 trillion in reparations.

    Oh, I think you'll come around before too long.

  • MNG||

    Yup, no thinly veiled racism among the right-leaning posters here, none at all...

  • Black people||

    Let's make that $50 trillion a piece!

  • Spencer||

    that wasn't thinly veiled at all.

  • MNG||

    To them it is, you should see it when it's explicit.

  • Spencer||

    no, no I shouldn't.

  • Achtung Coma Baby||

    Just the fuck up MNG! I'm on the phone with some people. I think I can get the money before the end of the day.

  • .||

    Sounded more like a lefty Democrat to me.

  • OO||

    chappele did a hilarious skit on reparations. after binge-buying cars, large screens, & drugs, everyone was poor again.

  • .||

    And then it was time for more reparations.

  • ||

    Even if it is a tax, it is my understanding that the Constitution requires all direct federal taxes to be levied proportionally - the sole exception being the income tax, by way of the 16th Amendment. I would think that the Obamacare penalty, if it is a tax, would amount to a direct, disproportionately levied tax, thus rendering it unconstitutional even under this understanding. Am I wrong?

  • ||

    Yes, you are wrong. Not because of your analysis of direct taxes, but because you believe the Constitution matters.

  • Tony||

    blah, blah, blah, blah, blah, blah, blah

  • MNG||

    "if the government had clearly structured the mandate as a tax, it probably would have been easier to justify constitutionally:"

    But that would have been simple and honest, something this administration tries pretty hard to avoid.

  • squishua||

    By choice I don't have insurance. The first thousand dollar "tax" bill I get for not having insurance and I'll becone a tax protester (cuz there's no way in HELL I'm going to save up an extra grand (on top of the thousands already withheld from my paychecks) to give Uncle Sam to piss away.

    This whole rotten evil system needs to come down!

  • ||

    Someday this war's gonna end...

  • ||

    Not having insurance by choice? Next, you'll be feeding us some BS line about going to the doctor, and using your own money to pay for services.

    Everyone knows that all of the uninsured skip out on their medical bills, and pass that cost on to the rest of society.

  • squishua||

    I've found that doctors & dentists usually offer a discount when you don't use insurance. This is mostly due to it being more of a paperwork hassle to get paid in full and in a timely manner from an insurance company.

    More people with insurance = higher prices for services.

  • ||

    Yes, but since the higher price is paid for by the insurance company its lost in the shuffle. I don't know why there is dental insurance at all. I've never had a non-elective dental surgery. Its pretty much all elective.

  • ||

    "I've found that doctors & dentists usually offer a discount when you don't use insurance."

    And even if they don't, I'm guessing that if you were to compare your total cost of medical care for the year, versus the amount you be required to contribute to a health insurance policy, you are still coming out ahead by paying out of pocket.

    Most employers who offer insurance, will pay more in wages to employees who decline coverage. Once you factor this in, most health insurance policies become even bigger losers.

    One of the worst things about ObamaCare is that the government isn't going to recognize high deductible plans as "approved" plans, meaning that anyone with thise type of plan will get hit with the fine.

  • sasob||

    I've found that doctors & dentists usually offer a discount when you don't use insurance.

    I've found that some won't accept you as a patient unless you do have insurance.

  • Anonymous Coward||

    I just paid $50 for a chest X-ray. With insurance, it would have cost $77.

    Counting cash is significantly easier than filling out forms and arguing with insurance adjusters.

  • ||

    That's awesome.

  • .||

    And if it's cash, it's much easier to hide from the taxing authorities, too. Don't think for one moment that doctors are any more honest than the rest of the population.

  • MNG||

    Wouldn't it have been much simpler to have a tax on the non-insured with the revenue going into a fund that would offset paying for medical visits for people who did not have insurance?

  • ||

    Why just the uninsured? Why shouldn't everyone pay the tax? If as a society, we have a responsibility to help the less fortunate, why should only one segment of the population be expected to contribute?

  • MNG||

    To cover the costs associated with their lack of insurance.

  • ||

    Just because a person doesn't have insurance, doesn't necessarily lead to imposing a cost on anyone. Basic medical services can easily be covered out of pocket.

    Your proposal only makes sense if your intention is to punish those who choose not to purchase health insurance.

  • MNG||

    the fund would offset paying for medical visits for people who did not have insurance. What are you not getting here?

  • ||

    Its not about those who don't have insurance, its about those who can't get insurance.

  • squishua||

    People without insurance pay for their own medical services! Unless they are also lowlife freeloaders. The two are not equivalent.

  • ||

    For most people, paying for anything other than catastrophic medical insurance is a money loser.

    My wife and I recently compared the amount of money we pay for our employer health insurance, to the amount of money our provider paid out on our behalf, and we're taking it in the ass.

    We would be much better off not having health insurance, taking the employer share as additional wages, and simply paying for care out of pocket.

  • ||

    What am I not getting? The concept of anyone having to offset the cost of another persons health care.

    You want to tax people who don't have insurance, and use that money to pay for the uninsured. What is the purpose of this proposal, unless a person feels that some sort of social responsibility exists related to health care. If such a responsibility exists, then everyone should should pay a tax to contribute to the costs of the uninsured.

    It's pretty simple. If we have a social responsibility, then everyone contributes. If we don't, then why are we singling out a certain group?

  • ||

    Because they own corporate jets?

  • ||

    I own a corporate jet?!

  • ||

    A pity there is no scheme by which recipients of other government largesse can be forced to repay society for their handouts.

  • ||

    Don't argue. It's a spoof.

  • ||

    The funny thing is that the insurance mandate, while being the lynchpin of Obama's scheme, isn't something the democrats really want. What they really want is to give pre-existing condition democrat voters free healthcare and the only way insurance companies will swallow that is if Mr. healthy 26 year old sales clerk is forced to buy premium healthcare which he'll never use.

    If Obama was honest about the wealth tranfer this really is, he'd have garnered near zero votes for it.

  • MNG||

    I think they've been pretty honest about this, if amazingly overcomplicated...

  • ||

    Nah, they weren't, because they tried to promote it as helping reduce the cost of healthcare by getting the non-insured insured. Except its not about having everyone pay their own way. Its about those who don't need premium insurance paying for those who need it and can't get it (because their uninsurable or they're just too poor).

    they could have instituted a general 1% increase in taxes and achieved the monetary amount. The only difference is that in this case, the burden falls disproportionately on those who don't need insurance but have higher incomes, you unaffiliated professionals or entreprenuers.

  • MNG||

    "that would offset paying for medical visits for people who did not have insurance?"

  • squishua||

    Why do you think the only way for doctors to get paid is through insurance?

    Hey, who offsets the cost of all those people who shop at the grocery store without food insurance??

  • Franklin Harris||

    When asked whether he believed the mandate was a tax, President Obama replied unequivocally: “I absolutely reject that notion.” But as soon as the case went to court, his administration's lawyers were quick to embrace it.

    That's because the president is a dick.

  • ||

    That's racist, given the myth about black men.

  • Warty||

    "It's twue! It's twue it's twue it's twue!"

    "Baby, you're suckin' on my elbow."

  • .||

    That's because the president is dishonest and dishonorable. He's no better than a cheap, jive, grifter.

  • Janeane Garofalo||

    That's racism, straight up.

  • .||

    Life must be hell for you, Janeane - going through life with a last name that sounds alot like someone puking their guts out.

  • ||

    In Japan health care insurance is mandatory, yet there is a significant portion of the population who avoids such. I would imagine the same thing happens in European nations as well. This will probably also be the case if this law is upheld by the SCOTUS. You're going to have a bunch of non-compliant people - and what is the government going to do? Throw them in jail? Not likely.

  • sasob||

    Probably arrange second class citizenship for them instead.

  • ||

    If you throw 'em in jail, they sure as hell aren't paying taxes, and the gov't has to give them free health care.

    So, kinda self-defeating, on both fronts.

    Which makes it a lock, I suppose.

  • Fatty Bolger||

    Which they do anyway. That's one of the problems to begin with. We're ALREADY paying for uninsured healthcare costs, one way or another. Obamacare will just make it a lot more expensive.

  • Invisible Finger||

    In Japan health care insurance is mandatory

    Anyone else see the same pattern? All countries with centralized health/insurance mandates are broke.

  • ||

    HHS SWAT raids, bitchez!!!

    If you don't pay up, we're coming to your house with guns drawn and flash-bang grenades at the ready. We're gonna kick your ass, mount your wife, and shoot your dog. And you ain't gonna do a f**king thing but cry like a pimp-slapped ho' and pony up your "fair share" like you're supposed to.

    Thank you for your cooperation.

    And don't forget to thank Obama that you live in the "Land of the Free and the Home of the Brave"...you little bitch.

  • ||

    "what is the government going to do? Throw them in jail? Not likely."

    They'll make you ineligible to get a driver's license. Or they will swear out a bench warrant. Or garnish youir wages. Or deduct it from your tax refund. Or whatever else they can come up with.

  • ||

    Damn joke names.

  • ||

    Irony, much?

  • ||

    huh?

  • ||

    Guess not. Carry on.

  • Brett L||

    On a slightly related note, we are now drone bombing Libertopia.

    Is there anywhere with a majority muslim population we aren't bombing or occupying besides Saudi Arabia and Syria?

  • WTF||

    Malaysia?

  • ||

    Deerborn?

  • .||

    Detroit?

  • Liberals||

    Wait, wait, wait! The American government is in Somalia? For how long, and do our douchebag comments about Somalia being a "libertarian paradise" still hold up?

  • squishua||

    The White House?

  • ||

    Will the war against Libertarians ever cease?

  • Brett L||

    Well, I have a photo of Captain Kirk armwrestling himself, so anything is possible.

  • ||

    No, it's Captain Kirk arm wrestling some kid.

  • Cliché Bandit||

    no, what you have is an HD version of a SugarFree'd link.

  • Brett L||

  • ||

    Still just one Kirk, dude.

  • NoVAHockey||

    what's the penalty again? a percentage of income? possibly less than the annual premium for a larded up benefit package?

  • sasob||

    Actually even people with no income have to pay a minimum penalty.

  • ||

    nah, if you have no income or little income you get a subsidy. Its all the young 20's-30 year olds who don't need premium insurance and don't work at mega corporations that will take it in the ass.

  • ||

    And, you can only avoid the ObamaCare tax is you have a DHS approved health insurance plan. High deductible insurance, or what Obama cutely calls "ACME insurance", isn't going to be approved by DHS, meaning that people with health insurance will be required to pay the fine.

  • ||

    IIRC from reading parts of the bill, the minimum is 2.5% of taxable income or $2500.00, whichever is greater. It has been a long time so I may be wrong.

  • ||

    From the Congressional Research Service summary:

    The penalty will be calculated as
    the greater of either (1) a percentage of the amount by which household income exceeds the
    personal exemption for the applicable tax year11 (“applicable income”) or (2) a flat dollar amount
    assessed on each taxpayer and any dependents (e.g., family), with the total penalty for a family
    capped at 300% of the flat dollar amount. The percentage penalty amount based on applicable
    income will be 1.0% in 2014, 2.0% in 2015, and 2.5% thereafter. The annual flat dollar amount
    will be phased in—$95 in 2014, $325 in 2015, and $695 in 2016 and beyond (adjusted for
    inflation), assessed for each taxpayer and any dependents, up to the family cap. The flat dollar
    amount will be reduced by one-half for dependents under the age of 18. Finally, the penalty for
    noncompliance cannot exceed the national average premium for bronze-level qualified health
    plans offered through exchanges (for the relevant family size).

    Got that?

  • ||

    Congressional Research Service summary summary: Fuck you, that's why.

  • NoVAHockey||

    http://www.nahu.org/legislativ.....Individual Mandate and Related.pdf

    found your report. check out the charts at the back. Think this sets up a "death spiral" situation? back of the envelope math seems like the family penalty is loads cheaper than an individual PPACA mandated plan, especially if I can pick one for the family member who needs it.

  • sasob||

    Got that?

    Yup:

    The penalty will be calculated as
    the greater of either (1) a percentage of the amount by which household income exceeds the
    personal exemption for the applicable tax year11 (“applicable income”) or (2) a flat dollar amount
    assessed on each taxpayer and any dependents...

    So if one has no income, his household income does not exceed a percentage of his allowable exemption - which means that his penalty will be a flat dollar amount...The annual flat dollar amount
    will be phased in—$95 in 2014, $325 in 2015, and $695 in 2016 and beyond (adjusted for
    inflation),...
    Which means that one will be subject to a minimum penalty of $95 in 2014 even if one has absolutely no income ( or taxable income?)with the amount increasing in each successive year. How convenient of them to adjust it for inflation - pity they can't manage to adjust capital gains taxes for inflation, too.

  • sasob||

    pity they can't manage to adjust capital gains taxes for inflation, too.

    Especially since the government and the Federal Reserve are the ones who cause inflation in the first place.

  • ||

    dude, there are subsidies built in for low income/no income people that virtually guarantees they'll have free healthcare and won't pay the penalty. The people that have it worst of is singles with a salary below $83,400 and above the federal minimum. Its basically a 2.5% tax hike for the 25% tax bracket.

  • sasob||

    dude, there are subsidies built in for low income/no income people that virtually guarantees they'll have free healthcare and won't pay the penalty.

    Would you like to show them to us? It's very unlikely that such people won't have to pay something. The government will probably take the position that being "subsidized" means that one can no longer qualify as being without income, in which case one will owe something. Most likely one will be required to buy the insurance before one can receive any sort of tax credit to cover part of it. After all, if such people are to be furnished "free" insurance by means of some credit like the Earned Income Credit, what would be the point of mandating that they have it and threatening them with a penalty if they don't?

    On the other hand if the so-called subsidies are only credits against tax owed, they wouldn't be much help to those who owe no tax to begin with ... unless the credit could be carried forward or backward to other tax years, and maybe not even then. There are people who live off their savings and owe no income tax; you can bet they won't be subsidized and that they will be assessed the penalty if they don't buy insurance.

    Read what RC posted of the law - do you see any exceptions for anyone?

  • sasob||

    BTW, even Medicare is not free, not even to seniors. My aged mother gets little more than the bare minumum monthly social security benefits and yet the feds still tax those benefits to pay for Medicare, even though she is well over 65 and finally elligible for it.

  • squishua||

    BTW, interesting pic. Post handjob "eww, he came all over my hands!" or what?

  • ||

    I feel guilty that some poor folks can't afford to go to the doctor. Let's create a plan that gives them free insurance --- without imposing any bit of the direct costs on me personally.

  • joen||

    Obama Administration: Using carefully worded bullshit since the last Administration used carefully worded bullshit to get us into a war. *Oh, I started a war by the way too.

  • ||

    By visiting "Penny Health" you can start lowering your medical insurance premium and help you get better coverage.

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