Why Would Anyone Pay the Penalty for Being Uninsured?
A recent A.P. story about IRS enforcement of ObamaCare's individual health insurance mandate tax focuses on the personnel required but also mentions a point I made a few months before the Supreme Court upheld that provision (in a post headlined "If the Penalty for Uninsured Taxpayers Survives, Good Luck Collecting It"): If people decide not to buy the medical coverage the government thinks they should have, there is not much the government can do about it. Paying the penalty generally will be a lot cheaper than buying the insurance, and in any case the penalty is easily dodged:
The law…severely limits the ability of the IRS to collect the penalties. There are no civil or criminal penalties for refusing to pay it and the IRS cannot seize bank accounts or dock wages to collect it. No interest accumulates for unpaid penalties.
So how can the IRS enforce the mandate? Scary letters and threats to withhold tax refunds.
The law allows the IRS to withhold tax refunds to collect the penalty, and most filers get refunds. This year, 77 percent of the 135 million individual income tax returns processed by the IRS qualified for a refund. The average refund: $2,707.
For those who don't qualify for a refund, a stern letter from the IRS can be effective, even if it doesn't come with the threat of civil or criminal penalties, said Elizabeth Maresca, a former IRS trial attorney who supervises the Tax & Consumer Litigation Clinic at the Fordham University law school.
"Most people pay because they're scared, and I don't think that's going to change," Maresca said.
It should, once word gets out that the IRS is essentially powerless to collect this penalty/tax. People can even stop the IRS from taking the money out of their refunds by the simple expedient of changing their withholding so that they come out even (or owe a little) at the end of the year. (They probably should do that anyway, unless they like the idea of floating Uncle Sam an interest-free loan every year.) In practice, no refund = no tax. Yet analysts at the Congressional Budget Office predict that 4 million Americans will pay the tax in 2016, when it takes full effect. How stupid do they think we are?
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How stupid do they think we are?
very.
"World's Dumbest Taxpayers" coming to TLC in October.
How long before we get "When the IRS Attacks" on FOX?
Since FOX is on 'public' airwaves, I think it will be forever.
Since FOX has to pay taxes, I don't see it.
Cable TV/satellite is 'public' airwaves?
Only to leftists.
I had my withholding as low as I could get it and I still got a refund last year. Though I think that might be because I started working halfway through the year.
Well I hope you learned your lesson.
Which is?
Never pay retail.
"Low" withholding? You mean you had as many exemptions as you could claim, right?
Yeah, sorry for the poor wording. I meant "low" as in "the amount of dollars coming out of each paycheck is as low as possible".
By not seeking out as much overtime as possible, and/or not seeking higher paying jobs, you're cheating the government out of tax revenue and not paying your fair share.
Though I think that might be because I started working halfway through the year.
I do the same thing Auric, but I've managed to still get a small refund for the last two years running.
Same here. Part of it may because of bonuses that are initially taxed at the highest bracket.
That will probably affect me this year (paid almost 40% on my Q1 bonus), but I didn't get any bonuses paid in 2011.
I think the Maresca quote hits it: people fear the IRS more than any agency at any level of govt because it never goes away, you are always presumed guilty, and most people hate the idea of owing anything. As an experiment, perhaps we should see how often the premise made in this story appears in the mainstream press.
Im sure I could google around for it, but does anyone know off the top of their head the rules for the penalty, or a link to such?
Im wondering what qualifies, how much has to be spent, and etc. I know the penalty varies with income too, but dont know details, and am not wading thru the damn bill.
A link to such, if you dare.
A direct link is what Im requesting. If I have to work for it, I will do it via google.
I apologize for the snark. Good luck.
"Most people pay because they're scared, and I don't think that's going to change," Maresca said.
And who better to ensure people remain scared than the federal government.
But hey, it's just a bunch of hyperbole when we point out that taxation is backed by the threat of force.
Yet analysts at the Congressional Budget Office predict that 4 million Americans will pay the tax in 2016, when it takes full effect. How stupid do they think we are?
My prediction: it will quickly become illegal for tax-preparers to show customers how to avoid the penaltax.
When I first skimmed the article, I didn't catch the 'former' part of her description. And I thought that her quote, while somewhat unexpected/ballsy, was quite reasonable for the IRS to say.
I think one of the problems with not paying the penalty is that you're making a couple of assumptions that might not be safe to make.
1) You're assuming that because the penalty can't be enforced now, it can't be enforced in the future.
2) You're assuming that if the penalty isn't paid today, they won't someday decide to charge you and charge you interest retroactively.
In other words, you're assuming a level of fairness that has no rational basis for being applied to anything associated with the IRS or the legislation surrounding it.
Exactly. It would be pretty trivial to pass a law that put teeth in the penaltax. After all, "tax-dodgers" are criminals. Both teams have a hobby horse they can ride going after them.
Not sure I understand all the implications on the Ex Post Facto issues of the penalty being a tax.
I'm not a lawyer but I sometimes play one on the internets...
Ex Post Facto applies to criminal cases (unless you're a sex offender, apparently)--not civil cases...
If the Supreme Court, in their infinite stupidity, already decided this is not a criminal issue--it's a tax? I know there are other taxes that have been implemented retroactively.
Can they send you to a private collection agency like they do with bad credit card debt? It seems to me that there are a lot of things they could do retroactively that don't involve criminal proceedings for not paying a tax.
If I had to make a bet, I would bet that over the long haul, the outcome where you don't have to pay whatever charges the IRS sends you in the mail? Is the least likely outcome.
They'll tolerate the long term legalization of marijuana before they'll tolerate taxpayers flouting the IRS en masse.
Ten years from now, too, people who don't buy health insurance will be thought of pretty much the same way as people who don't buy auto insurance.
...very few people feel sorry for those of us who are too poor to buy auto insurance, and the laws evolved to reflect that. No reason to think this won't go likewise.
If you're too poor for car insurance, you're too poor for a car and gas.
I notice the people with insufficient income for car insurance still have income for beer, cigarettes and lottery tickets.
And if someone dies from lack of health insurance, it's of no matter to me whatsoever. If they crash their car into me, it is. The two cases are not at all comparable.
That, and car insurance only affects people with cars, not every beating heart under the sun.
If you're too poor for car insurance, you're too poor for a car and gas.
I don't want to go through this whole thing again. The abbreviated version is: insure your own car against uninsured drivers. Don't make poor people insure your car for you. Not only is it ineffective (you still have to insure your own car against uninsured drivers anyway), it's also morally pathetic to use the government to penalize poor people for not spending their money to insure your car for you...
Now do you see why that's directly relevant to the individual mandate?
Funny how quickly ObamaCare went from being about helping poor people get health insurance to being about forcing poor people to spend their money in such a way as to make healthcare supposedly less expensive for everyone else.
Car insurance makes for a more efficient process than trying to sue everyone that hits you. Its a unique situation since most people own cars and the legal system is not prepared to handle that many issues.
This is more akin to home insurance, where, if you own your own home, you shouldn't have to pay to insure it, even though the cost of protecting your home (via fire, police, etc) is born by all taxpayers (yourself included). The problem is with health, we just assume that life preservation treatment is the same as a flu shot and that treatment is infinite, because if the wealthy can do it, so should I. The whole system is doomed to failure or massive cutbacks however, even with the mandate. You can't demand infinite care with finite expenses. Obamacare may outlast Obama's presidency, but it won't outlast the financial collapse of the government if it is not severely curtailed (with SS, medicare and defense budgets also cut in half).
Yup. Now that its officially a tax anyway, the reason for leaving all the standard collection tools off has gone away.
Tax or mandate, the system won't survive the promise of inifinite care.
Even the socialist French chuckle at our version of healthcare.
Or simply take the accumulated tax, future penalty and future interest out of your Estate when you die. The IRS always gets its due, eventually.
Here's a radical idea, if you don't buy insurance and you show up at the ER, they don't have to treat you.
Unless you prove ability to pay.
"In the wealthiest, most-compassionate nation on Earth? Hell, no!"
Good thing restaurants don't work like our hospitals.
Cash? Uh. That's $345.50 for the burger and fries.
If you show up hungry, they have to feed you.
ER treatment doesn't bankrupt the government. Cancer and continuing care does.
I'll pay for a 1000 gunshot wounds before I pay for 1 old dudes 30 year battle with cancer.
The problem isn't the free emergency care they are required to provide so much as the free primary care they provide out of fear of being sued.
Why can't we just have a Utopian healthcare system like Cuba's?
Cuba scrambles to fight cholera outbreak
http://www.myfoxny.com/story/1.....a-outbreak
That's shitty.
A+
They're going to be pooped after dealing with that outbreak.
Because cholera is better than TB?
http://www.palmbeachpost.com/n.....ret/nPpLs/
Or Hepatitis C?
http://www.cbsnews.com/8301-50.....ts-follow/
Sounds like all the more reason to stay away from the homeless and hospitals.
And Florida.
Especially Florida.
Wingnut.com keeps spreading the lie that 16,000 IRS agents have been hired to enforce the mandate.
no, 16,000 IRS agents have been hired to enforce the host of other taxes in that bill.
That most Americans just roll over and don't question the premise of the income tax in the first place - and abide a system that lets Congress take their own money before they even see it themselves - tells me they're PLENTY stupid.
I think Demonocles makes a good point.
Some people have no choice about how the withholding on their overtime and bonuses is done. They get a refund no matter how they set up their withholding.
So competent and hardworking people will find it harder to avoid the tax than layabout clockwatchers.
Also, Ken Shultz makes a very good point. Today's enforcement mechanism may not be tomorrow's.
And what if you haven't been paying for, say, five or six years when they decide to make the switch?
Maybe not paying for one year is easily doable, but when you start talking about not paying indefinitely, you're running a large (and continually growing) risk, and you'll have bigger and bigger tax planning problems as you move along.
I always have fairly complex returns. For me the cost to ostentatiously not comply, in terms of what I'd have to invest in tax planning, is probably higher than the amount of the penalty.
Like I said the first day, it's easier and safer just to out-and-out cheat on your returns to offset the amount of the penalty. Let them think they took the money, but steal it back elsewhere. Call it the Ragnar plan.
I'm also mailing out a 10 page set of documents to the IRS today because they audited my 2010 returns (a year in which I made about $11k as a student). They're trying to claim I owe them $5000 for the taxes on some stock my father sold (and claimed on his taxes).
Audits must be madness. My buddy used to do pro bono tax work for low income clients; he would knock down the IRS' claims by thousands. The IRS act like consumer debt collectors, with a lot of the negotiating done by low level employees (much like the patent system). It's unfortunate that so many people cave because they think the government is correct at the level of execution, even if it's wrong at the level of policy. The tyrannical overreach of agency employees should never be underestimated.
Look at who we put in power. How stupid do you think we're NOT?
Somewhere between a lot and very.
This is where the kicker come in.
In Roberts' ruling, he says that taxes are not coercive in the same way that a regulatory mandate is, but says that they could be if they were high enough.
Thus if Congress were to change the rules, and increase the tax, or add criminal penalties, it would invite an as-applied challange to the mandate.
And if not enough people buy insurance, Congress wil have to do it, or they will get the insurance death spiral.
Without a objective measure of when it becomes "coercive", can it be challenged time and time again, until they finally rule that it is coercive?
I mean every single time it increases. Like, even if the first increase is ruled as still a tax, but then they have to increase it again.
Probably the most incoherent part of Roberts ruling. After listing all the ways that its not like other taxes, he rules that its just like other taxes.
Prediction: they will collect it as a standard-issue tax liability, and soon. It will be challenged. It will be upheld, because (a) the penaltax itself is a valid exercise of the tax power (precedent, bitchez) and (b) valid taxes can be collected through the usual means.
Congress will just put a one line rider in an appropriations bill to make the normal collection methods applicable. No one will notice until after it is passed.
insurance death spiral is inevitable, or have you not read the other sections of the bill. The insurance companies are just hoping nobody actually tries to ask for the care the bill guaranteed them.
The intent was that people would not get insurance and the Congress would be eventually forced to go Single Payer for all. Pelosi told us so. That is why she didn't care what was in the bill, because she knows that all roads lead to Single Payer.
No, Americans are pretty much that stupid, or this wouldn't exist in the first place.
In practice, no refund = no tax. Yet analysts at the Congressional Budget Office predict that 4 million Americans will pay the tax in 2016, when it takes full effect. How stupid do they think we are?
it is easy to dodge if you make enough that you do not get a refund.
If you make under $30,000 you are virtually guaranteed to get refund no matter what category you choose for withholding.
Essentially everyone but the working poor can avoid this tax.
I love how the left thinks Obama is ohhh so wonderful while he totally screws the poor.
When has Obama cared about the poor? He does care about their votes, though. Racial and Ethnic solidarity has been enough for him to carry those votes, and he hasn't actually done for them except talk and the Medicaid expansion. And now that States have the option of rejecting the Medicaid expansion, Obama may have done nothing at all for the poor.