“Call It A Penalty, Call It A Fine, Don’t Call It A Tax”: Debunking The Individual Mandate “Tax”
Having lost their Supreme Court fight against the Affordable Care Act, opponents of health care reform have in recent days been attacking the individual mandate provision of the law as a “tax” on the middle class. This line of reasoning only makes sense if you think penalties for littering, speeding, or engaging in other irresponsible behavior are also “taxes.”
Yes, it’s true that conservative Chief Justice John Roberts used a tax rationale when upholding the constitutionality of the individual mandate—and the entire law—last week. But Roberts was making a technical argument and using the word “tax” in a way that really only makes sense in an arcane legal context.
First, some background: The health care law’s so-called “individual mandate” provision requires people who can afford to buy health insurance to do so, and when it’s phased in, it will assess a penalty of up to 2.5 percent of household income on those who don’t. That’s only fair, since the health care costs of the uninsured are borne by the rest of us.
You don’t need a law degree to understand the difference between a fine and a tax, and this one falls pretty neatly into the former category, as we explain below. Moreover, the vast majority of Americans—rich, poor, or middle class—will never be assessed what’s more rightly understood as the “freeloader penalty” at the center of this debate.
Still, while the tax-themed attack on the individual mandate is incoherent, it remains dangerous. Opponents of health reform well understand the power of the T-word to fire popular resentment, and will try to confuse the public about what the individual mandate is and how it works. Here are some facts to keep in mind.
Unlike taxes, this penalty is avoidable
Taxes are, for the most part, involuntary. We pay taxes on our income and when we buy things. The only way to avoid taxes is to earn less money and consume less. Penalties and fines, however, are quite different. We can avoid fines by avoiding bad behavior.
The individual mandate presents people with a choice: Either have health insurance or pay an annual penalty. The only people who will pay this penalty are those who willfully neglect to take responsibility for getting health insurance—and then stick the rest of us with the bill when they get sick or injured.
People who have health insurance will never pay the penalty
More than 80 percent of Americans today have health insurance, and the health reform law will dramatically expand coverage. When the law is fully phased in, only 6 percent of Americans will face the choice of either buying private insurance they can afford or paying a penalty, according to the Urban Institute. And only 1.2 percent of Americans will actually pay the penalty, according to congressional estimates.
Americans who can’t afford insurance will have it provided for them
Under the law, people who can’t afford to buy insurance will receive Medicaid coverage or the government will split with them the cost of buying private health insurance. Therefore, the penalty will only apply to people who can afford health insurance but would rather have taxpayers—you and me—bail them out when they need medical attention.
The individual mandate is grounded in conservative principles of individual responsibility
The idea that people should be required to purchase health insurance if they can afford to do so was first popularized by the conservative Heritage Foundation in 1989 and first implemented in law by former Massachusetts Gov. Mitt Romney—a Republican. The idea then and today is to promote individual responsibility and to prevent self-sufficient people from relying on public assistance. “[E]ach household has the obligation, to the extent it is able, to avoid placing demands on society by protecting itself,” Heritage wrote in defense of the individual mandate.
Happily, the evidence suggests that the individual mandate penalty will apply nationwide to a small fraction of the population. Less than 1 percent of residents of Massachusetts, the only state with an individual mandate in place, were assessed the penalty in 2009.
Once the federal law takes full effect in 2014 and Americans see that the individual mandate penalty only applies to a small number of freeloaders, the antitax argument should lose all power.
It already appears to be waning in some very telling quarters. An advisor to Romney on Monday said that the presumptive GOP presidential nominee agrees with President Barack Obama that the individual mandate penalty is not a tax.
By: Gadi Dechter, Center for American Progress, July 3, 2012
“Assuming Voters Are Fools”: GOP Tax Talk Takes A Trivial Turn
For more than three years, Republican critics of President Obama’s health care reform law have come up with all kinds of reasons to hate the law, most of which fall apart rather quickly under scrutiny. Thanks to last week’s Supreme Court ruling, however, the right has a new talking point they’ve largely ignored up until now: Obamacare raises taxes.
For Republicans, this should effectively end the conversation. The individual mandate counts as a “tax”; taxes are inherently evil; ergo the law is awful and anyone who supported it deserves to be publicly flogged. What’s more, conservatives are arguing that this wasn’t just any ol’ tax increase — it was the Largest Tax Increase Ever.
On Fox News, Jim Pinkerton characterized the mandate as “the biggest tax increase in the history of the universe.”
I hope most objective observers can agree this is, for lack of a better word, dumb. As Josh Marshall explained, “The Congressional Budget Office says the mandate penalty will raise $27 billion between 2012 and 2021. $27 billion over a decade. Anybody who cares to can do the math. But if you want to call it a ‘tax increase’ — which is debatable — it’s clearly one of the tiniest ones in history.”
This one tax penalty raises less than $3 billion a year, and it would affect about 1% of the population. What’s more, even if we’re generous, and assume the right is talking about all of the provisions within the law that raise new revenue, it’s still not even close to being the largest tax increase ever.
And just to top this off, Mitt Romney, the man Republicans want to be president, created and imposed the exact same tax penalty. He is, in fact, the only public official in American history to implement the policy the right is now pretending to find outrageous.
The entire argument is demonstrably ridiculous, apparently crafted under the assumption that voters are fools. We’ll see if the assumption is correct.
By: Steve Benen, The Maddow Blog, July 2, 2012
“The Wingnut Line”: Rick Scott Announces Florida Won’t Take Medicaid Money
It’s not shocking that Rick Scott becomes the first governor to announce officially that his state (Florida) won’t accept the new Medicaid money under the health-care law. In case you’re not up on the deets, it’s the subsidies for poor and working-class people, up to 133 percent above the poverty line, to buy insurance.
Funny. I seem to remember a time when Scott was quite eager to take Medi-CARE money! That wasn’t his. You remember what I’m talking about.
So this is what social programs mean to Scott. As a private-sector businessman, something to steal from. As a public “servant,” something to play political games with. Floridians will die so that he can be first in the wingnut line.
I don’t know the precise number, but in a state that size, surely a couple million people/families who’ll be eligible for care under the new law in 2014–families of four up to $88,000 are eligible for the subsidies–will be denied the chance to buy coverage at subsidized rates because Scott has refused this money. From a policy perspective, this is the next battleground, the pressure point of resistance for the hard-shell ideologues. How many states will really sacrifice billions in federal dollars for the sake of ideology, and how many will do it before the election so they get a gold star from Rove?
Those interested in what we used to call facts may want to read through this nice primer from the Center on Budget and Policy Priorities, which describes the Medicaid transfer from the feds to the states and explains how the federal government will actually be picking up 93 percent of the costs over the next nine years.
As to biggest health-care news of the weekend, the John Roberts switch reported by CBS yesterday, I will have much more to say about that story tomorrow. But watch these Republican governors. If not for the poor people in their states, I say fine, let them refuse it. Saves me money since I live in Maryland and they’re mostly moocher states anyway. It’s just a few more of my tax spare change not going to Mississippi. All right by me.
By: Michael Tomasky, The Daily Beast, July 2, 2012
“Completely Disingenous”: Can Romney Remain Absurd Until November?
If you will forgive yet another post on the implications of the Supreme Court’s ACA decision, it is important to understand that for all the “excitement” and “motivation” it may create among “base voters,” this development also makes every day on the campaign trail a tightrope for Mitt Romney. He was already going to have to navigate his way to November talking constantly about the economy and the federal budget even as he was stuck with economic and budget policies that would horrify swing voters if they were aware of them. And now there will be no escape from the subject of a national health reform initiative modeled on his own plan in a gubernatorial administration that now seems about a million years away from where he has landed ideologically in order to win his party’s presidential nomination.
National Journal‘s Michael Hirsh refers to Romney’s current positioning on health care as presenting an “Absurd Romney:”
The difficulty of Absurd Romney’s task is pointed up by Jonathan Gruber, an MIT economist who helped Romney design his 2006 health insurance program in Massachusetts. He says that the then-governor used reasoning and language very similar to that of Chief Justice John Roberts in arguing for the necessity of an individual mandate. While Roberts said that Congress did not have the right to mandate behavior, it did retain the right to “tax and spend,” including penalizing people for not buying health care.
“It’s a penalty for free riding on the system. That’s the way Gov. Romney talked about it,” says Gruber, who later became one of the key architects of President Obama’s Affordable Care Act, which was modeled in part on the Romney law. “Justice Roberts used similar language today.” Back in the 2000s, when Gruber demonstrated to Romney with computer models that, absent an individual mandate, one-third of Massachusetts’ poorest and sickest would remain uninsured (and drive up costs for everyone), Romney jumped on the point, instantly converted, says Gruber. Romney went at the problem “like a management consultant or an engineer” with no ideological taint, even against the advice of his conservative political advisers, Gruber says. “They were concerned about the politics of universal health care. He argued them down.”
Today, says Gruber, Romney is being “completely disingenuous” in arguing against a law whose principles he once embraced. And somewhat absurd. Gruber says Romney’s suggestion that, as in Massachusetts when he was governor, states should be permitted to decide on their health care plans is also disingenuous. Massachusetts could devise its health care law only because it had access to a large amount of federal money, a $385 million Medicaid grant that it needed to use to extend care to the poor. “He says the states could do it but not the federal government. Well, actually the states can’t do it” because they don’t have the money, says Gruber. “What he should be saying is that he ‘ll give the states a trillion dollars to come up with their own plans, but he’s not going to do that.”
Now some readers will say Romney and most of his supporters don’t give a damn about consistency, logic, or avoiding the appearance of being Absurd, and will just brazen it out. That may be true. But the thing about lying all the time about who you are, what you’ve done, and what you intend to do is that it frequently causes even the most disciplined dissembler to screw up or at least fail to make sense to voters with even minimal discernment. That’s the risk Romney is going to have to take nearly every time he opens his mouth over the next four months.
By: Ed Kilgore, Washington Monthly Political Animal, June 29, 2012
“‘That Is Not The Issue”: Mitch McConnell On How GOP Will Insure Americans After Repealing ObamaCare
Since the Supreme Court last week upheld the Affordable Care Act, Republicans have been scrambling for a response. Without much to say now that the law has been ruled constitutional, the GOP has fallen back on its pledge to repeal ObamaCare. However, the new health care law provides 30 million Americans with access to health insurance. So how do Republicans plan to replace this key feature if they repeal?
Fox News’s Chris Wallace asked Senate Minority Leader Mitch McConnell (R-KY) this important question on Fox News Sunday today and the senior senator from Kentucky had no answer. After McConnell meandered through the typical GOP talking points that they plan to allow the sale of health insurance across state lines and that they will institute medical malpractice reform, he finally settled on an answer: Insuring Americans “is not the issue”:
WALLACE: One of the keys to ObamaCare is that it will extend insurance access to 30 million people who are now uninsured. In your replacement, how would you provide universal coverage?
MCCONNELL: Well first let me say the first single thing we can do for the American system is get rid of ObamaCare. … The single biggest direction we can take in terms of improving health care is to get rid of this monstrosity. […]
WALLACE: But you’re talking about repealing and replace, how would you provide universal coverage?MCCONNELL: I’ll get to it in a minute. […]WALLACE: I just want to ask, what specifically are you going to do to provide universal coverage to the 30 million people who are uninsured?
MCCONNELL: That is not the issue. The question is, how can you go step by step to improve the American health care system. … We’re not going to turn the American health care system into a Western European system.
If Republicans are successful in repealing ObamaCare, they’ll also have to answer how they’ll provide coverage for those with pre-existing conditions, lower-income Americans, and even the millions of young Americans who can now stay on their parents’ health care plans until age 26.
By: Ben Armbruster, Think Progress, July 1, 2012
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