THE BIGGEST TAX INCREASE IN U.S. HISTORY?
August 2, 2010
President Obama has repeatedly asserted that the new health care reform's individual mandate requiring everyone to have qualified health insurance coverage or pay a penalty is not a tax. And yet the Department of Justice (DOJ) now claims the mandate is a tax, but not because the legislation refers to the mandate as a tax -- it doesn't. Rather, the DOJ lawyers want the Supreme Court to confer its blessings on ObamaCare when the issue comes before the Court, and the lawyers are increasingly concerned that the 20-plus state challenge claiming the mandate is unconstitutional may hold up, says Merrill Matthews, a resident scholar with the Institute for Policy Innovation.
The Democratic defense has morphed from the: "Of course we have the constitutional power to impose an individual mandate" defense to, "The Commerce Clause gives us the power to mandate coverage" defense, and now to their, "It's a tax" defense.
Many conservatives rejoiced at the flip-flop, proclaiming they have caught the president and his administration in one more broken promise: not to raise taxes on families making less than $250,000 a year. If the mandate really is a tax, it could be the largest in history -- and it affects everyone, says Matthews:
- A Kaiser Family Foundation survey of employers last year found that average premiums for an employer-provided family policy, which is more likely to be the type of comprehensive coverage required by ObamaCare, was $13,375, about 25 percent of the median household income of $52,000.
- That $13,375 family policy costs the same for both lower- and higher-income workers; so if the mandate is a tax, it's equivalent to a 50 percent income tax on a family making $25,000 a year but a 10 percent income tax on a family making $130,000 a year. Talk about regressive taxes!
Of course, the Obama administration will argue that it is addressing the regressivity problem by providing a sliding scale subsidy, up to 400 percent of the federal poverty level (about $88,000 for a family of four in 2010), to insulate lower- and middle-income families. But subsidies don't negate the fact that ObamaCare imposes the tax on every individual in the country. It simply means that someone else -- i.e., either employers or other taxpayers -- will be paying the tax for millions of Americans, says Matthews.
Source: Merrill Matthews, "The Biggest Tax Increase in U.S. History?" Forbes, July 26, 2010.
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