Thursday, July 12, 2012

Is Obamacare a tax or not? The surprising truth.

Is Obamacare a tax?  Most (55%) of Americans seem to think so according to a recent poll.  Also, Romney and the Republicans have tied themselves in knots saying it is or isn’t or “what’s the talking point?”  So is Obamacare a tax or not?  The true answer might surprise you.

Let me clear up this issue by discussing the FACTS.

First, let’s get this straight.  Nowhere in their ruling did the Supreme Court address the issue of whether the Affordable Care Act (Obamacare) as a whole was a tax.  Just didn’t happen.  The court ruled on whether the penalties imposed to enforce the individual mandate were taxes.  These penalties and the individual mandate are just one small part of the Affordable Care Act, an important part but a small part.  The court DID NOT say, or even discuss, whether the other portions of Obamacare such as the pre-existing conditions clauses, the expansion of Medicaid, the right to keep a child on your insurance, and the hundreds of other positions in the Act were taxes.  The tax discussion in the decision ONLY INVOLVED the penalties under the individual mandate clause.

Second, the Supreme Court actually ruled that the individual mandate penalties both WERE and WERE NOT taxes.  I know that sounds strange but that was the ruling.

Roberts in the majority opinion first wrote that the individual mandate penalties WERE NOT taxes.  He had to do that or he could not have declared that the penalties WERE taxes so that he could uphold the act.  What?: you say.  Let me explain.  If the penalties were taxes, then the plaintiffs had no standing to sue for relief because of something called the Anti-Injunction Act which says you can’t sue for relief from a tax until you are actually subject to the tax.  Since the Affordable Care penalties don’t go into effect until 2014, plaintiffs would have no standing to sue because they had not yet been subject to a tax.  Roberts and the majority ruled that the penalties WERE NOT a tax in terms of the application of the Anti-Injunction Act.  The wording of the Act made it clear that Congress did not intend the penalties to be treated as a “tax” for purposes of the Anti-Injunction Act.

Next Roberts and the majority ruled that the penalties WERE taxes and thus were constitutional under Congress’ power to raise and collect taxes.  The majority ruled that while the penalties WERE NOT a “tax” when it comes to the Anti-Injunction Act, they WERE a “tax” when it comes to the application of the Constitution based upon how the penalties are imposed and collected.  Roberts wrote: “The payment is not so high that there is really no choice but to buy health insurance; the payment is not limited to willful violations, as penalties for unlawful acts often are; and the payment is collected solely by the IRS through the normal means of taxation…Neither the Affordable Care Act nor any other law attaches negative legal consequences to not buying health insurance, beyond requiring a payment to the IRS.”  In short, the court reasoned that the penalties were really a special kind of tax levied to partially offset the expense of providing medical care to the uninsured.  It is similar to a tax on gasoline that drivers of cars must pay to help offset the cost of roads and bridges.

So, the truth is the Supreme Court ruled that the penalties assessed for failing to purchase insurance were a tax when it came to the Constitutional issue of whether Congress could impose them BUT were not a tax when it came to the issue of whether the Anti-injunction Act applied.  Clear?  Got it?

You can download and read the full decision yourself here:

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