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Jack Mintz: If Obamacare is a tax and not a penalty, Americans could be taxed for not biking.
National Post>Financial Post ^ | Jack Mintz

Posted on 07/08/2012 7:52:52 PM PDT by Steven Tyler

Read this article last week, late to post. I wanted to share with all Freepers.

Jack Mintz: If Obamacare is a tax and not a penalty, Americans could be taxed for not biking

Taxing people on what they don’t consume creates a dangerous precedent

Talk about confusion.

First U.S. Supreme Court Chief Justice John G. Roberts decides that the Obamacare mandate is really a tax. Then the Republicans admonished the Democrats for raising taxes, followed by Democrats’ insistence — to avoid the tax-and-spend epithet — that the health mandate payment is a penalty. Then, of all people, Republican presidential candidate Mitt Romney sides with the Democrats, since his own Massachusetts plan had a similar levy on the uninsured population. Next, New Jersey Governor Chris Christie, a VP contender, claims the mandate is both a tax and a penalty.

Great drama, but in the scheme of things, this Supreme Court decision reasserts the power of governments to levy taxes of all sorts, making it very much a political decision. Worse, the decision opens up a new approach to taxing people that sets a dangerous precedent, not only for the United States but for others like Canada.

Under Obama’s Patient Protection and Affordable Care Act of 2010, individuals who do not purchase health insurance pay a “shared-responsibility payment,” starting in 2014. For example, by 2016, the payment is 2.5% of individual income, with a minimum of $695 per year and a maximum that is the average yearly premium for insurance that covers 60% of the cost of 10 specified services (expected to be about $4,800). The payment would be reimbursed as part of the income tax remitted by an expected four million U.S. taxpayers.

Even though the act describes the payment as a penalty, Judge Roberts argues that it is not. The shared-responsibility payment is not a punishment for an unlawful act, he reasons. Instead, the payment is based on income and household characteristics, like dependent children, that determine the amount owing. Nothing in the legislation states it is illegal not to buy insurance and non-filers need not pay the tax.

Judge Roberts then contends that the shared-responsibility payment is like any other tax that raises revenue for governments. Like excise taxes and tariffs, the tax is intended to change behaviour — in this case to encourage individuals to buy health insurance, just like tariffs that encourage home-based manufacturing or sales taxes to discourage smoking. The mandate tax cannot be so high as to force all individuals to purchase health insurance — “the power to tax is not the power to destroy.”

For tax-policy eggheads, the question as to what is a tax versus a penalty is pretty exciting stuff. Most citizens look at taxes, fees and penalties as taking money out of their pocketbooks, no matter the name. For governments designing policy and legislation, however, it is crucial to define correctly the type of levy being imposed to make sure legislation is appropriately framed. Advertisement

Governments raise all sorts of taxes and levies to fund public services or change behaviour. Taxes such as income, sales and payroll levies are compulsory payments to the government. Some are “benefit taxes” whereby a payment is made to a compulsory-enrolled social program like social security or health care. Non-tax levies like user charges and royalties are cost-recovery payments for a government service that people may choose or not to purchase. Penalties discourage illegal behaviour.

In the case of Obama’s shared responsibility payment, it could have fallen into one of several categories depending on design.

As a penalty, the Obama levy is not a good example. The penalty is not related to the social cost associated with those not buying insurance, which is the higher premiums that would be set on those purchasing health insurance. If the penalty was set at the household cost of enrolling in a health insurance plan for all (and unrelated to the income tax), it would have been more like a penalty for not buying a plan.

Nor is the shared responsibility payment a good example of a user charge or benefit tax. When an American does not have health insurance, the patient can still obtain subsidized services from community and hospital services often supported by the government. In these circumstances, it could be argued that the payment is used to cover the public cost of these uninsured services. However, the payment is unrelated to these benefits, so it therefore does not qualify as a user fee or benefit tax.

This leaves the shared-responsibility payment to be similar to an excise tax to change behaviour and raise revenue, as Roberts contends. Around the world, governments levy all sorts of excises, such as those on cigarettes and liquor (to discourage smoking and drinking), luxuries, fuel and tariffs on imported goods. What is perhaps troubling about Roberts’ excise-tax argument is that these taxes are intended to discourage particular forms of consumption and indirectly encourage consumption of something else.

But it is hard to think of excise taxes on things we don’t consume. It is therefore difficult to think of taxes similar to the Obamacare mandate payment. This does not mean that the mandate payment is not a tax, since governments can institute taxes in innovative ways.

Roberts did not mention that some people could choose not to buy a regulated health insurance plan if they prefer to self-insure. A person could put some savings aside to fund future health care, just like funding retirement and other individual needs. In effect, the Obama shared-responsibility payment is a tax on not consuming regulated privately provided health insurance in the United States.

More worrisome, this approach to taxation opens up new avenues. For example, governments could impose taxes on firms that do not provide pension plans. They could tax people who choose not to bike to work. Or they could tax people who don’t go to publicly funded universities or colleges.

After the reading the judgment, I do think Roberts is right that the mandate tax is a tax, not a penalty. However, if we start to tax people according to what they don’t consume, an endless number of new taxes could be concocted to promote government priorities. That is a new ball of wax.

Financial Post

Jack M. Mintz is Palmer chair at the School of Public Policy at the University of Calgary.


TOPICS: Business/Economy; Government; News/Current Events
KEYWORDS: aca; obamacare; tax
A view of Obamatax-from Canada.(late but still interesting)
1 posted on 07/08/2012 7:53:07 PM PDT by Steven Tyler
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To: Steven Tyler

Link

http://opinion.financialpost.com/2012/07/03/jack-mintz-if-obamacare-is-a-tax-and-not-a-penalty-americans-could-be-taxed-for-not-biking/


2 posted on 07/08/2012 7:58:55 PM PDT by Steven Tyler
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To: Steven Tyler

We could be taxed for not voting democrat.

The fact of the matter is, America is no longer a free country, and there’s no way to fix that.


3 posted on 07/08/2012 7:58:55 PM PDT by chris37 (Heartless.)
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To: Steven Tyler

“For example, governments could impose taxes on firms that do not provide pension plans. They could tax people who choose not to bike to work. “

... Or for not buying broccoli at least once a week... or....for not buying a Volt car once every five years...or..

the list is endless.

The gov can make a list of things that you must buy, or pay a penalty/tax. Talk about total government control.

They already charge “sin taxes” on things like cigarettes, but now they can charge taxes for NOT buying something they mandate that you should buy.


4 posted on 07/08/2012 8:11:09 PM PDT by Innovative (None are so blind that will not see.)
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To: Steven Tyler

Bttt.


5 posted on 07/08/2012 8:17:13 PM PDT by Inyo-Mono (My greatest fear is that when I'm gone my wife will sell my guns for what I told her I paid for them)
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To: Steven Tyler

All I hear from demonrats is that this tax will only effect the top 1% (Not true! but that isn’t my point) and they keep calling them deadbeats for not buying that product. Now here is my point, if it were the top 1% that isn’t buying health insurance, it is by choice! They pay cash instead and pay a whole lot less, they DO NOT leave the bill for others to pay, and in fact may help to keep prices for medical care from going even higher! Why is no one calling them out on that? Deadbeats???? Because they pay cash and choose not to purchase insurance? What is it they don’t like, that these people get it for less money? This entire bill is the most convoluted thing I have ever seen in my life, and so is the rationale they are trumpeting to convince us otherwise. Also, insurance DOES NOT GUARANTEE access. That is said loud or often enough!


6 posted on 07/08/2012 8:17:41 PM PDT by gidget7 ("When a man assumes a public trust, he should consider himself as public property." Thomas Jefferson)
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To: chris37

There is a way to fix it.... It may require a war however.


7 posted on 07/08/2012 8:18:23 PM PDT by cableguymn (For the first time in my life. I fear my country's government.)
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To: cableguymn

That, sadly, is a losing proposition.


8 posted on 07/08/2012 8:23:24 PM PDT by chris37 (Heartless.)
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To: Steven Tyler

More like they give you a tax credit for buying a bicycle and there-fore those who don’t buy one pay more taxes than those that do.
But Obama didn’t want to admit Obama-care was a tax.


9 posted on 07/08/2012 8:29:26 PM PDT by sickoflibs (ABBBO chant: "We must support Romney because he doesn't matter." (Obam-ney Care is bad now ))
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To: chris37
The fact of the matter is, America is no longer a free country, and there’s no way to fix that.

That's the truth!

10 posted on 07/08/2012 8:49:04 PM PDT by tsowellfan (http://www.cafenetamerica.com/)
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To: Steven Tyler

We’ll be taxed for a lot more than not biking if this islamist wins a second term. We’ll be paying the jizya.


11 posted on 07/08/2012 8:50:05 PM PDT by onedoug
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To: Steven Tyler
Roberts on the power of Congress to lay and collect taxes (I.8.1):

Put simply, Congress may tax and spend. This grant gives the Federal Government considerable influence even in areas where it cannot directly regulate. The Federal Government may enact a tax on an activity that it cannot authorize, forbid, or otherwise control.

12 posted on 07/08/2012 9:12:23 PM PDT by Ken H
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To: chris37
We WILL be taxed for not losing x% of weight every year. It's a politically correct crusade that they've been looking for a way to enforce.

They've found a way now.

13 posted on 07/08/2012 9:20:08 PM PDT by HeartlandOfAmerica ("We have prepared for the unbeliever, whips and chains and blazing fires!" Koran Sura 76:4)
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To: gidget7

Pelosi’s et all problem are the free riders who can afford to pay for medical services, but chosse to stick the bill “to the rest of us”.

I suppose Pelosi, Axelrod et all never heard of Debt Collectors and Skip tracers.

The Progs could “collect” all of the cash from the deadbeat among the 1%, and put some good people to work.

They do not need the ACA and 0bamatax


14 posted on 07/08/2012 9:27:02 PM PDT by Steven Tyler
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To: Steven Tyler

People WILL be taxed for not exercising. And Roberts KNOWS people will be taxed for not eating broccoli.....or what the government says is healthy.


15 posted on 07/08/2012 9:35:49 PM PDT by Terry Mross ( To all my kin: Do not attempt to contact me as long as you love obama.)
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To: Steven Tyler

Another way to look at the ridiculous “penalty” debate is to simply observe that HHS set aside $500 million for IRS enforcement of the ACA. The number of agents ranges from 500 to 16500 I read somewhere...

So the IRS may or may not be in the “penalty” business. But they sure as hell are in the tax business with all the authority to seize assets, garnish wages, and audit your ass until the “penalty” is resolved to their satisfaction.


16 posted on 07/08/2012 9:43:22 PM PDT by Xcoastie (If you think education is expensive, try ignorance)
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To: chris37

For one side yes. it is.


17 posted on 07/08/2012 9:57:41 PM PDT by cableguymn (For the first time in my life. I fear my country's government.)
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To: cableguymn

I’d say our side, cableguy.

We have no way of opposing the US military, and they have been promoting very left wing officers for some time now.

That is by design.


18 posted on 07/08/2012 10:59:13 PM PDT by chris37 (Heartless.)
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To: chris37

Those Wesley Clark wannabees are there, but will they have grunts to carry out their orders effectively? What they’ve been doing to the army cuts both ways.


19 posted on 07/09/2012 1:14:55 AM PDT by coydog (Time to feed the pigs!)
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To: chris37

Why?


20 posted on 07/09/2012 1:24:30 AM PDT by antceecee (Bless us Father.. have mercy on us and protect us from evil.)
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To: Steven Tyler
Actually the bill labels it as a tax:

Subdivision A - Affordable Healthcare Choices
Title IV -Amendments to Internal Revenue Code of 1986
Subtitle A - Shared Responsibility
Part 1 - Individual Responsibility
Sec. 401: "Tax on Individuals Without Acceptable Health Care Coverage"
21 posted on 07/09/2012 4:56:24 AM PDT by khelus
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To: chris37

Perhaps.. A left wing general can bark all the orders he wants..

what if no one listens?


22 posted on 07/09/2012 5:11:06 AM PDT by cableguymn (For the first time in my life. I fear my country's government.)
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To: cableguymn

What if they do?


23 posted on 07/09/2012 7:32:52 AM PDT by chris37 (Heartless.)
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To: antceecee

Any number of reasons.

Civillians will not defeat the us military.

Civillians do not have any organization.

Civillians are not trained as soldiers and police are trained.

The government can interecpt every single communication made in the country.

The us government could choose to use chemical and biological weapons against us.

I could go on and on, really.


24 posted on 07/09/2012 7:35:43 AM PDT by chris37 (Heartless.)
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To: chris37

Then we die for our cause.

“give me liberty or give me death” come to mind?

I am not suggesting we go straight to war. It’s the last resort.


25 posted on 07/09/2012 8:35:57 AM PDT by cableguymn (For the first time in my life. I fear my country's government.)
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To: tsowellfan; chris37

well... I guess you could just give up. Failure is always an option.


26 posted on 07/09/2012 8:46:23 AM PDT by cableguymn (For the first time in my life. I fear my country's government.)
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To: cableguymn

Failure already occurred.


27 posted on 07/09/2012 8:55:39 AM PDT by chris37 (Heartless.)
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To: cableguymn

Yes, it most certainly does come to mind, and I expect that is what will happen.


28 posted on 07/09/2012 8:59:59 AM PDT by chris37 (Heartless.)
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To: chris37

Yes.. It has. However, you don’t have to stop at failure. We lost a battle. Not the war.


29 posted on 07/09/2012 9:03:06 AM PDT by cableguymn (For the first time in my life. I fear my country's government.)
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To: cableguymn

What we lost was our freedom.

It’s gone.

Yes, you can still go to a movie on Friday evening and order a pizza.

But the government now controls what counts, and that is any aspect of our behavior or non-bahavior that they choose to control, and they will choose all.


30 posted on 07/09/2012 9:42:00 AM PDT by chris37 (Heartless.)
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To: chris37

What we lost was our freedom.

It’s gone.


So that is it? parties over? Have a good night?

Sorry.. I have kids. There is no way in hell I will just lay down and allow our freedom to be gone forever. They deserve better.


31 posted on 07/09/2012 11:21:09 AM PDT by cableguymn (For the first time in my life. I fear my country's government.)
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To: rrdog

rrdog - I thought you might want to see this article, since you made the same point two weeks ago in this vanity post:

http://www.freerepublic.com/focus/f-news/2901008/posts


32 posted on 07/10/2012 6:14:17 PM PDT by Tired of Taxes
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