"Is The Individual Mandate Penalty A Tax?"
In his decision striking down the individual health insurance mandate provision of the Affordable Care Act, Judge Henry Hudson rejected the government’s argument that the penalties for failing to buy insurance were a tax and ruled that they were penalties that could not be justified by Congress’s authority to raise taxes for the general welfare. This morning, the crew at Morning Joe accused the Obama administration of playing both sides of the argument: rejecting the Republican charge that the mandate constituted a new tax while it was selling the law, but embracing the claim to defend it in a court of law. Joe played this clip from Obama’s appearance on Good Morning America in September 2009:
OBAMA: Well, hold on a second, George. Here — here’s what’s happening. You and I are both paying $900 bucks on average — our families — in higher premiums because of uncompensated care. Now, what I’ve said is that, if you can’t afford health insurance, you certainly shouldn’t be punished for that. That’s just piling on. If, on the other hand, we’re giving tax credits — we’ve set up an exchange, you are now part of a big pool, we’ve driven down the costs, we’ve done everything we can, and you actually can afford health insurance, but you’ve just decided, You know what? I want to take my chances, and then you get hit by a bus, and you and I have to pay for the emergency room care, that’s…
What it’s saying is, is that we’re not going to have other people carrying your burdens for you any more than the fact that right now everybody in America, just about, has to get auto insurance. Nobody considers that a tax increase. People say to themselves, that is a fair way to make sure that, if you hit my car, that I’m not covering all the costs.
What Obama told George Stephanopoulos in September is still true today. The individual mandate — originally a Republican idea — is designed to get everyone to take responsibility for their own health and eliminate the cost shifts that occur when individuals receive uncompensated care. “What it’s saying is, is that we’re not going to have other people carrying your burdens for you any more than the fact that right now everybody in America, just about, has to get auto insurance,” Obama said at the time. “Nobody considers that a tax increase. People say to themselves, that is a fair way to make sure that, if you hit my car, that I’m not covering all the costs.”
The mandate is not a “tax” in the sense that its primary purpose is to raise revenue even though it meets the legal definition, which is somewhat different than the popular understanding of that term. As Ian Millhiser tells me, conservatives obviously think “that they have caught Obama in some grand contradiction because he uses one meaning of the word ‘tax’ in one context and his lawyers use another meaning of that term in a legal brief, but the word ‘tax’ has an unusually broad meaning in the constitutional context — it can include nearly any provision that adds money to the federal treasury.
Lawrence O’Donnell’s argument (in the clip above) that the mandate doesn’t exist because the federal government can’t enforce the penalties (or tax) that are associated with it, is more straightforward, but overstated. Section 1502 (pg. 170) of the law states, “In the case of any failure by a taxpayer to timely pay any penalty imposed by this section, such taxpayer shall not be subject to any criminal prosecution or penalty.” The Secretary also can’t “file notice of lien with respect to any property of a taxpayer” or “levy on any such property with respect to such failure.” However, as IRS Commissioner Doug Shulman noted back in April, the agency can still penalize individuals who don’t comply with the mandate by “reducing or confiscating their tax refunds.” “These are not the kinds of things we send agents out about,” Shulman said. “These are things where you get a letter from us. Congress was very careful to make sure there was nothing too punitive in this bill.”