Taxes

Don't Forget: The Deadline for Payments to Offset Costs Is April 15

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Americans for Tax Reform notes that President Obama's health care plan continues to dance around the fact that he wants to tax Americans who fail to obtain the medical coverage he thinks they should have. The summary (PDF) of his plan calls the sum collected from uninsured Americans "a payment to offset the cost of care they will inevitably need." The White House also calls it an "assessment" and a "fee." But not a tax, since that description would acknowledge that the president is violating his campaign pledge not to raise "any form" of taxes on households earning less than $250,000 a year. 

By contrast, the health care bill (PDF) passed by the House calls this payment/assessment/fee "a tax on individuals without acceptable health care coverage." An early version (PDF) of the Senate bill called it an "excise tax on individuals without essential health benefits coverage." The T-word was expunged from the final version (PDF) of the Senate bill, the starting point for Obama's plan, in favor of penalty. But as ATR notes, the nature of this penalty is clear from the way it is imposed and collected:

Page 322 of the Senate bill (the "Patient Protection and Affordable Care Act") says that "any penalty imposed by this section with respect to any month shall be included with a taxpayer's return under Chapter 1 [of the Internal Revenue Code (IRC)] for the taxable year which includes such month."  The procedure to collect the tax on page 336 of the bill references Chapter 68 of the IRC. On page 337 of the bill, a new Chapter 48 is added to Subtitle D of the Code (Miscellaneous Excise Taxes) in order to create the uninsurance tax. Page 341 of the bill continues to reference various parts of the Code that need to be amended in order to cover this new tax.

Anyone reading this precise legislative language can see how this tax would be collected.  An uninsured individual would add the excise tax to their regular income tax burden on the 1040 Form every April.  It is much like other excise taxes collected on the 1040 (early IRA withdrawal tax, for example).

As a tax on living, the payment/assessment/fee/penalty would be an unprecedented (and unconstitutional) exercise of congressional power no matter what it was called. But Obama's word games reflect his general tendency to break promises while pretending he isn't.

The president also continues to offer a misleading rationale for the individual insurance mandate, saying it "helps everyone, both insured and uninsured, by reducing cost shifting, where people with insurance end up covering the inevitable health care costs of the uninsured." What he does not say is that it also facilitates cost shifting, forcing young and healthy Americans to subsidize insurance for older, sicker ones. Instead of making a moral argument for this policy, Obama conceals what he is proposing by saying the mandate allows "robust health insurance reforms that will curb insurance company abuses and increase the security and stability of health insurance for all Americans." Translation: By forcing people to buy health insurance they don't want, we can generate the revenue necessary to cover high-risk policyholders without charging them more.