NOTE: Hear Steve Moore expound on ObamaCare taxes on The Kudlow Report (video).
July 10, 2012
The Tax You Need Not Pay
Jon N. Hall
Except for the decision on the expansion of Medicaid, ObamaCare largely survived the scrutiny of the Supreme Court. However, the individual mandate is gone; the Constitution does not allow Congress to command Americans to own health insurance. ObamaCare survived because Chief Justice John Roberts magically transmuted the penalty (for noncompliance with the now-defunct individual mandate) into a tax. But on page 39 of the decision, we read:
It does not apply to individuals who do not pay federal income taxes because their household income is less than the filing threshold in the Internal Revenue Code. §5000A(e)(2). For taxpayers who do owe the payment, its amount is determined by such familiar factors as taxable income, number of dependents, and joint filing status.
So not only does ObamaCare tax the individual, but that tax is a part of the Individual Income Tax. But when judging the characteristics of a tax, one must ask: what does the tax assess?
John Roberts’ new “ObamaCare tax” assesses ownership of health insurance. It’s some strange type of property tax. But it’s triggered only if one doesn’t own said property. The ObamaCare tax is an amalgam of property tax and income tax. If so, this new tax seems unique.
Under the ObamaCare tax, taxpayers who don’t own health insurance will be taxed at different rates depending on their income, but some won’t have to pay the tax at all because they aren’t required to file a 1040. So the ObamaCare tax is going to be a bit unfair for those folks right at the “filing threshold.” If you don’t own health insurance and you’re one cent over the threshold, the IRS expects you to tack on an extra $695 to your tax bill.
Under the original ObamaCare, Congress commanded us to own insurance. But under the new ObamaCare, Congress taxes us for not owning what Congress cannot command us to own. (My CPU is still collating, Dave. I need more data.) In any event, one thing most Americans know is that you don’t mess with the IRS. So if the penalty in ObamaCare is now a tax, what is the penalty for not paying that new tax? Well, on page 170 of the actual law, we read:
(A) WAIVER OF CRIMINAL PENALTIES.-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 with respect to such failure.
(B) LIMITATIONS ON LIENS AND LEVIES.-The Secretary
(i) file notice of lien with respect to any property
of a taxpayer by reason of any failure to pay the penalty
imposed by this section, or
(ii) levy on any such property with respect to such failure.
Is ObamaCare great or what? With all the taxes I’m familiar with, if you don’t pay them, you’re in big trouble. But with ObamaCare, there’s no enforcement — it’s a toothless tax. And the lack of enforceability was known about before the bill was signed. In 2010, Fox News reported:
The use of liens and seizures otherwise authorized for collection of taxes does not apply to the collection of this penalty,” according to the non-partisan Joint Committee on Taxation. “Non-compliance with the personal responsibility requirement to have health coverage is not subject to criminal or civil penalties under the code and interest does not accrue for failure to pay such assessments in a timely manner.
Regardless of whether it’s a penalty or a tax, this funding mechanism in ObamaCare was always pathetically inadequate because the penalty was not nearly big enough. What Democrats really wanted all along was to expand Medicaid. But the Court has just dealt that a severe blow. So the cost of ObamaCare to the federal taxpayer continues to rise.
If under the now-discredited understanding of the Commerce Clause, Congress ordered all of us to buy a Chevy Volt (to stop global warming or something), no one would care if Congress called the exaction for noncompliance a penalty or a tax. What folks would object to is the command to buy a Volt. On page 47 (italics added), Roberts writes:
There may, however, be a more fundamental objection to a tax on those who lack health insurance. Even if only a tax, the payment under §5000A(b) remains a burden that the Federal Government imposes for an omission, not an act. If it is troubling to interpret the Commerce Clause as authorizing Congress to regulate those who abstain from commerce, perhaps it should be similarly troubling to permit Congress to impose a tax for not doing something.
We seem to have swapped an unlimited commerce power for an unlimited taxing power. And since it’s constitutional, this unworkable, bankrupting law sold to America under false pretenses still stands. So when ObamaCare finally destroys the health insurance industry and health insurance is no longer available in America, will we still have to pay the ObamaCare tax?
Oh, I forgot…we don’t really have to pay it.