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.
Perhaps.. A left wing general can bark all the orders he wants..
what if no one listens?
What if they do?
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.
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.
well... I guess you could just give up. Failure is always an option.
Failure already occurred.
Yes, it most certainly does come to mind, and I expect that is what will happen.
Yes.. It has. However, you don’t have to stop at failure. We lost a battle. Not the war.
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.
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.
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
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