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A Tax or a Penalty?


Thursday July 5th, 2012   •   Posted by Craig Eyermann at 10:59am PDT   •  
http://www.justice.gov/usao/eousa/vr/Although the easiest answer to the question is “it’s both”, the semantic games being played by the White House in response to the Supreme Court’s finding that the individual mandate prescribed by the Patient Protection and Affordable Care Act (aka “ObamaCare) is only constitutional as a tax under federal law leads us to try to settle the dispute today.

Under President Obama’s health care law, people who do not have health insurance coverage either through their employer or on their own will have to pay the U.S. government an amount of money that is based upon their income, as indexed to the poverty income threshold that applies for their household. So, right off the bat, people with higher incomes will have to pay more than people with lower incomes, just like they do under the U.S.’ progressive income tax regime.

Meanwhile, people who do have health insurance coverage either through their employer or on their own will not have to pay the U.S. government any money for not having health insurance. So it would seem that the federal law’s individual mandate is simply a penalty imposed upon people without health insurance.

The problem with that, to this armchair legal analyst’s way of thinking, is that it would violate the due process clause of the U.S. Constitution, as expressed in the fifth and fourteenth amendments of the Constitution, which requires the laws of the U.S. to apply equally to everyone. To be constitutional, the individual mandate must be a tax that everyone in the United States is required to pay.

As for why only those who do not have health insurance coverage will be the only ones having to pay the tax, that’s because the federal government, under the ObamaCare law, is effectively providing those who do have health insurance coverage with a tax credit in the exact amount of the tax they would otherwise have to pay. Those individuals without health insurance, who have nothing to claim against the tax, get stuck with a higher tax bill.

That’s really what will make it feel like a penalty.

Featured Image:
U.S. Department of Justice



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