Taxes Are The New Death Panels: Exposing The Latest Lie About Obamacare

Republicans are responding to the Supreme Court’s ruling upholding the individual mandate by constructing a new “death panels”-like lie. The law, they argue, imposes a burdensome tax on millions of middle class families who will have to pay a penalty for not purchasing health care coverage by 2014. The line originates in the majority’s decision, which found that Congress has the authority to require individuals to buy coverage under its taxing power, but it doesn’t mean what the Republicans are suggesting.

The truth is that the penalty for not buying insurance — $695 or 2.5 percent of household income — is well in line with other policies that are designed to encourage and promote a particular kind of economic behavior. On Friday morning, NBC’s Chuck Todd compared the penalty to a speeding ticket and asked House Majority Leader Eric Cantor (R-VA) to distinguish between the two taxes. Cantor could not:

TODD: On the tax front quickly, is a speeding ticket a tax? By that same definition? You can avoid paying this tax if you get insurance. […]

CANTOR: First of all, let me — I can’t respond to whether the speeding ticket would be considered a tax or not under the states’ authority any states’ authority. What I can tell you is the court came down on this issue decided that it was a tax to coerce some type of behavior.

Watch it:

In the case of health care, the law is offering an incentive for younger and healthier Americans to purchase health insurance coverage before they fall ill and pass on the costs of their treatments on to the government and other premium payers. Widespread take-up of coverage could cut government expenditures on uncompensated care in half. As Mitt Romney explained in 2006, “I don’t think the free market ever envisioned an idea that people would be able to do something and make other people pay for it.” And after successful implementation of reform in Massachusetts, few are.


On the federal level, the Congressional Budget Office is projecting that 30 million Americans will enroll in insurance as a result of the law, millions more will receive a tax cut to help them afford coverage, and of the remaining uninsured, “the majority of them will not be subject to the penalty”:

21 million nonelderly residents will be uninsured in 2016, but the majority of them will not be subject to the penalty. Unauthorized immigrants, for example, are exempted from the mandate to obtain health insurance. Others will be subject to the mandate but exempted from the penalty — for example, because they will have income low enough that they are not required to file an income tax return, because they are members of Indian tribes, or because the premium they would have to pay would exceed a specified share of their income (initially 8 percent in 2014 and indexed over time). CBO and JCT estimate that between 13 million and 14 million of the uninsured in 2016 will qualify for one or more of those exemptions. Of the remaining 7 million to 8 million uninsured, some individuals will be granted exemptions from the penalty because of hardship, and others will be exempted from the mandate on the basis of their religious beliefs. […]

After accounting for all of those factors, CBO and JCT estimate that about 4 million people will pay a penalty because they will be uninsured in 2016 (a figure that includes uninsured dependents who have the penalty paid on their behalf).

Real world experience suggests that Americans are more likely to purchase insurance than pay the penalty for going without coverage. For instance, in Massachusetts, the only state with an insurance mandate, less than 1 percent of the state’s residents paid the penalty in 2009. Surveys of the uninsured have also found that an overwhelming majority — 76 percent of the uninsured — would rather comply with the individual mandate in the Affordable Care Act and purchase insurance than pay the far less onerous penalty for forgoing it. Experts believe that “health insurance mandates differ from some other requirements, such as the requirement to pay taxes” because “enrollees individually receive a tangible good–health insurance — that they value.”


During a press conference call this afternoon, MIT economist Jonathan Gruber — who advised both Mitt Romney and Barack Obama on health care — stressed that less than 1 percent of (or 44,000 out of 6 million) Massachusetts residents are paying the penalty for not enrolling in health insurance. That fee helps the state fund the uncompensated care of people who become sick but don’t have personal insurance. Since Romneycare went into effect, “annual state spending for uncompensated care dropped by $118 million over the first five years of reform.”