Skip to comments.Jack Mintz: If Obamacare is a tax and not a penalty, Americans could be taxed for not biking.
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 dont 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 Obamas 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 Obamas 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 dont 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 dont 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 dont consume, an endless number of new taxes could be concocted to promote government priorities. That is a new ball of wax.
Jack M. Mintz is Palmer chair at the School of Public Policy at the University of Calgary.
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.
“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.
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!
There is a way to fix it.... It may require a war however.
That, sadly, is a losing proposition.
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.
That's the truth!
We’ll be taxed for a lot more than not biking if this islamist wins a second term. We’ll be paying the jizya.
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.
They've found a way now.
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
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.
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.
For one side yes. it is.
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.
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.