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The Spectacle Blog

CBO: Millions of Middle-Class Americans Will Pay ObamaCare Tax Penalty

By Philip Klein on 4.22.10 @ 4:16PM

Throughout the health care debate, I wrote about why the individual mandate is really a middle-class tax hike. Now, the Congressional Budget Office has released data estimating that by 2016, 3 million Americans earning less than $59,000 a year will face a penalty for not having health insurance. An additional 900,000 earning more than that will also pay the penalty.

To be clear, these numbers underestimate the full cost of the mandate. To start with, the estimates don't include those Americans who will decide to purchase insurance in response to the mandate. If somebody otherwise wouldn't choose to purchase insurance but because of the mandate ends up paying thousands of dollars in of premiums, that represents a cost, too. On the flip side, if CBO is overestimating those who will decide to purchase insurance, then it means that more will end up paying the penalty.

In addition, the CBO numbers only factor in people who it predicts will actually admit in their tax returns that they're uninsured. The CBO notes that, "other individuals will try to avoid making payments. Therefore, the estimates presented here account for likely compliance rates, as well as the ability of the Internal Revenue Service (IRS) to administer and collect the penalty." In other words, the numbers are only CBO estimates of how many people will pay the tax, not estimates of how many people are subject to the tax. Boost enforcement could boost the number of people paying taxes.

As for the actual cost involved, the penalty will be the higher of either $695 or 2.5% of income. Effectively, those earning below $27,800 would pay the flat rate, and after that point would begin paying the percentage. Once a person earns more than $40,000, the penalty will exceed $1,000. At $59,000, it would reach $1,475.

There's an important lesson here about the nature of government power. Liberals start off by pushing the very popular idea of requiring insurers to cover those with preexisting conditions (an idea that Republicans have trouble criticizing). Yet to do that, they have to impose a mandate. Thus, as a result of their goal to help one segment of the population, millions of middle-class Americans will face hefty tax hikes and higher insurance premiums. Once again, an example of liberals defining compassion as a willingness to spend other peoples' money.

View all comments (43) | Leave a comment

Mark MacInnis| 4.22.10 @ 5:26PM

It is worse than you think. Factor in the potential for employers to simply cease to offer employer paid health care at all (it will be in their interest to do so..)...instead, they will convert a portion of the cost of healthcare to each employees wages or salaries. This will then be subject, as gross income, to income, social security and medicare taxes, and the alternative minimum tax. With no indexing of rates to offset this sudden surge of taxable income. I did the math.... if all companies stop providing health insurance to their employees, the numbers are staggering...it is a $200 BILLION tax increase. And it is a regressive tax, at that. From a percentage of income standpoint, it will be more heavily weighted on the lower and middle classes than on the rich. Oh, yeah. And this will be on top of the VAT these wretches are making noise about....guess those 16,500 new revenue agents will need to have something to do, right.

Note to self....buy more ammo this week.

Deborah D| 4.23.10 @ 8:19AM

Good grief, Mr. MacInnis, that's about as clear as I've ever seen it written. And the Dems wonder why Americans are P.O'd!!

Mr. Klein, you've been excellent on your reporting of the health care boondoggle. Thank you, sir, for doing the job the mainstream media won't do: telling the truth to the American people.

jake1492| 4.23.10 @ 10:17AM

"Note to self. Buy more ammo." And you folks are the same ones criticizing Bill Clinton for highlighting in a recent speech the threat of violence from right wing extremists......hmmmmmm

It is unfortunate that so many in a place like this feel compelled to ignore certain important facts of the situation and amplify other things...some of them facts....and some of them simply often repeated insults. It is almost as if folks don't really care about the issue involved, just more about "getting" the other side.

There are specific measures in the health care bill to discourage employers from dropping coverage of employees. You may know that and choose to ignore it because it doesn't fit the tidy (mean spiritied and insulting) narrative you salaciously promote. Or perhaps you don't know about this.... in which case it would be helpful to get informed.

Do you disagree with the principal that there is a moral need to help all people have a minum standard of health care? If you do agree with that principal....how would you do it? You appear to simply cherry pick any aspect of a package deal that could be construed as detrimental to an identifiable group and emphasize it without regard to the overal effect. You are practicing wedge issue politics for the purpose of inflaming inter-group conflict. What is the point?

"Don't touch my priveledge under any circumstances" a million times from a million directions does not a country make.

LARR| 4.23.10 @ 10:51AM

Sure - I disagree with the Government forcing me to cover the cost of your moral desire. I cover my moral desires by giving to charity. Oh..and BTW..at a much higher pctg than either the Pres and VP do (for 2009 it was 11%) . And this was not a "minimum standard" - it's essentially everyone gets the same..

fishydude| 4.23.10 @ 12:46PM

Typical liberal. There is nothing moral about forcing people to buy anything.
However it is quite immoral for elected officials to ignore the damage done by decades of government action. Rather than admitting the real problem and undoing it, they vote to make the situation worse.
What I do? 3 simple things. And no one in government will do them. 1. Eliminate the ban on interstate sale of health insurance. 2. Eliminate the anti-trust exemption for health insurance companies. 3. Restore the first dollar tax deduction for all health related expenses.
All three of these actions will lower the cost of insurance and extend first dollar benefits to the self employed that are limited only to those who work for large companies. Why will no one in Washington take these actions? Because the reform had nothing to do with health care. It was about growing the size and scope of government.
I here it from liberals all the time. So pious in the belief they are superior. Anyone who disagrees with them is a greedy selfish bass turd.
It is not charity when it is forced. It is not volunteering when the government "requires" it.
It is not compassionate when the government eliminates affordable insurance option by requiring more coverage than individuals wish to buy. In Massachusetts, the mandates outlawed affordable high deductible catastrophic insurance coverage making criminals out of people who could not afford or chose not to buy expensive comprehensive coverage.

ricg| 4.23.10 @ 1:00PM

LARR is right. It's not government's function to attend to private conceptions of "moral needs." You are simply changing the unpleasant subject that this legislative passed in part on the false promises of lowered cost, better care, and no new taxes on the middle class. Why don't you tell the people what these specific measures are to prevent employers from dropping insurance?

Gene| 4.23.10 @ 3:10PM

please oint out the measures that discourge employers from dropping health coverage,, also there is already minimum health care for the uninsured ,, and I might add illeagl alieans.

Dr Joe| 4.24.10 @ 3:21AM

G'Day Jake'

I unlike yourself accept that rights come from the same source our Founding Fathers claimed and NOT a Government.
I also find very interesting that the old liberal argument " you can't legislate morality" only applies to cus onservatives and behavior you agree with.

There are universal moral absolutes and I suggest you study that and learn and begin to live them.

Dr Joe

wyn| 4.24.10 @ 9:44PM

Re: specific measures in the health care bill to discourage employers from dropping coverage of employees. Sir, what specific measures? And so what? If companies calculate that they will go under, what measures can possibly prevent them from doing something about it - like firing half the staff? It's that or go bankrupt. Either way, Congress and Obama - 1; We the People -0

NDanger| 4.26.10 @ 2:32AM

I do deny that there is a moral responsibility to provide health care to anyone, much as there is no responsibility to provide a car, a summer home, a new set of golf clubs, etc. There is less of a constitutional responsibility which is the only authority to allow government action. People make choices, those who do not choose to buy and can are on their own. For those who can not afford it, MEDICAID provides a minimum level of care

MIke| 5.1.10 @ 8:12AM

Well jake1492 I see you like all liberals are happy to tell me and the rest of us working people just how we should share all we have worked for and be happy about it. You had alot to say in your post but not one mention of any facts(libs never have facts)thing to support your argument. I wonder if it would be so hard for you to share some of the points in the Health Care Bill that you seem to know so much about to disprove what the CBO has stated in thier report,the truth is coming out now that they have ramed this down our throats. This is stuff that should have been on the table before they passed it but then that would be them admiting to the rest of us they are out to screw America,Again!

conversefive| 4.23.10 @ 12:05AM

It's all irrelevant. This was never about mandating people purchase insurance. By design the health care plan recently passed is simply the means of destroying the entire industry and instituting the single-payer system these jokers have wanted for years.

jake1492| 4.23.10 @ 10:22AM

What would be wrong with a single payer system for the minimum level of health care for everyone that allow individuals to purchase more coverage for themselves?

akw| 4.23.10 @ 10:58AM

What would be wrong? EVERY single payer system in the world is dealing with the same problems we're dealing with - spiraling health CARE costs. Switching to single payer doesn't fix the underlying problem - the cost of the care itself, not the cost of insurance!

wyn| 4.24.10 @ 9:49PM

Ever hear of Parkinsons' Law? One bureaucrat begets ten more without any benefit to the citizen.

fishydude| 4.23.10 @ 12:55PM

Not really single payer. It will be two payer. Self funded unlimited care for the wealthy and power elite. One limited and rationed care system for the rest of us. Canada claims to have a single payer but it is not. Their wealthy and ruling elite just come to the US for health services. The elite here will never support a measure that either forces them to wait in line behind the help or leave the country for care. There will be exclusive member only hospitals with all the latest in diagnostic care and then there will be the left overs for the rest of us.
This is the government that is creating CAFE mandates that will ensure only the wealthy can afford a family size car while the rest if use have to use 3 or three cars because they are so small, thus using as much gas as one family car. But the message is clear. One standard for them, and one for us. And it is liberal democrats pushing the hardest for this bifurcation of society.

Narendra Digwa| 4.23.10 @ 6:21AM

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Prudence| 4.23.10 @ 8:48AM

The Democratic Insurance Mandate was put into existence by trickery and fraud of the Democrats. They should pay the bills. Send them your bill today -- be the first in line. They bought it, they can pay it.

Ken (Old Texican)| 4.23.10 @ 9:08AM

Mr. Klein,

Mark,

Thanks for the summary breakouts of costs. We do have to keep in mind, though, that the price-tags quoted by the Democrats were always the BIG lie.

Didn't we all know that...really?

Heck, all one has to do is glance at Medicare spirals.

What I hope we can keep in the front of our thinking is that this whole thing is a "control vehicle". Just one of them of course...but a huge "dog collar" on every American.

Please, let's not loose sight of their whole agenda.

jake1492| 4.23.10 @ 10:20AM

What is your solution to the moral imperative of health care for the poor sir?

A former lib| 4.23.10 @ 10:36AM

jake1492, you are confusing the redistribution (socialism/communism) idea of "social justice" with the moral imperative of individual responsibility to perform charity. There cannot be an official morality, only an individual one. And in regard to your suggestion of basic services through a primary pay, with the option of voluntary purchase of supplemental insurance, this has been done. In England, it led to a two-tier medical system where the rich get better service because they can afford the insurance. Remember, the insurance company is betting (and fixing the rules 0n the premise) that you will stay well. You are willing to pay forward on the premise that you will be sick. You are paying extra for extra service. Where's the equity, sir?

Mark Boabaca| 4.23.10 @ 10:50AM

Gosh, jake, have you heard of SCHIP, Medicare, Medicaid, health departments, low-cost clinics, just to name a few? Probably not. Instead, you wold prefer to have even more government programs that we can't afford.

If there are really 30 million to 46 million uninsured people in this country, how much do you think it would cost to insure these people with a simple, low-cost insurance plan?

Let's say you want to insure all 46 million people at a cost of $2,000 each per year. You could easily negotiate this rate with insurance companies due to the volume of business that they would receive. (If you plan to demonize insurance companies for dropping individuals from their plans, be sure to put Medicare at the top of the pile. Thanks.)

That would cost $92 billion WITHOUT adding over 100 new government bureaucracies, thousands of IRS agents, and more control from the federal government.

Instead we have The New York Times, USA Today, AP, Reuters, and others confessing, after the law has been passed, that this healthcare legislation will increase costs to the middle and lower class, companies will lose billions of dollars, and millions of Americans will LOSE their insurance coverage, even though President Obama promised,"If you like your doctor, you can keep your doctor," among many other lies.

But please continue to spout off about "the moral imperative of health care" on this site. I am quite certain you will receive all the attention your parents never gave you as a child.

Happy trolling.

LARR| 4.23.10 @ 10:54AM

Again - if it is a moral imperitive for you, then open your wallet and help someone out!!! Don't hide behind the gov't using force to take from others.

gary| 4.23.10 @ 10:28AM

jake1492 - there is no such thing as a federally mandated moral imperative. I thought you libs were all for the separation of church and state. Forced charity is not charity; it's extortion.

rick| 4.23.10 @ 10:30AM

Do you disagree with the principal that there is a moral need to help all people have a minum standard of health care?
No, its not my responsibility to provide health care for others. It's my responsibility to care for myself and family. It's your responsibility to care for yourself and family. Not happy with that...Cuba will give you all the health care you can use along with all the other benefits that come with socialism. Need help with a plane ticket?

Pete| 4.23.10 @ 10:40AM

This entire string is based upon the false premise that the progressive asses in office actually care about healthcare, coverage, etc.... They do not. They care about power and a mechanism through which they can enrich themselves and their friends.

Gunner| 4.23.10 @ 10:41AM

"There are specific measures in the health care bill to discourage employers from dropping coverage of employees."
Are there are specific measures in the health care bill to discourage employers from dropping employees due to coverage? ......hmmmmmm

Pocono Joe| 4.23.10 @ 10:48AM

Come on rick don't be so harsh. Don't you want these people to feel good.......on your money?

Orel| 4.23.10 @ 11:10AM

For business and institutions, paying for Health Insurance for an employee can be easily avoided. You hire a person as a temp and you are not mandated to offer the employee insurance and after that period of time , you offer only a contract for another 6 months or a year without health insurance. It is widely practice in Europe, specially with Professors at universities to avoid giving tenure. The government is not going to penalise the business owner but the poor guy who at the end of the year will have to pay that fee for not having insurance. The Socialists believe that this system it encourages the poors to live a healthier life(single and no kids) and to avoid getting into the health system that they cannot afford.

Sea Dog| 4.23.10 @ 11:14AM

If Healthcare is a 'right', then let's be sure and make it one by amending the Constitution and including it and Obamacare under the Bill of Rights. This will require 2/3 majority to pass the amendment in Congress, the require a referendum on the federal ballot so the people can approve or dis-approve. Let the People Decide if it is a 'right' - or am I smoking some weird California medical herb.

Max Fendt| 4.23.10 @ 11:52AM

Many of the people that still support this bill will NEVER do a careful analysis of it. Lenin called them useful idiots.

OP Dave| 4.23.10 @ 12:01PM

Here's a moral imperative:

THOU SHALT NOT COVET!!!

Those on the left, especially those in government, need a remedial course on morality.

Orel| 4.23.10 @ 12:07PM

To Max: Yes and there were 52% of useful idiots voting for this Communist regime! Look at Greece today. It has became a 3rd world country and they have socialise medicine...so the poor can feel better about being poor and some rich idiots can feel better about having billions of money. Pathetic leadership, pathetic mentality and pathetic reasoning but these too shall pass.

WaltzingMtilda| 4.23.10 @ 12:29PM

Say it with me, people: health insurance does NOT equal health care. So great! Now we all have insurance! Good luck getting actual treatment once the full impact of this disaster is fully realized.

Derik Johnson| 4.23.10 @ 5:59PM

Lets Finish This

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Yosemeti Sam| 4.24.10 @ 12:36AM

CBO?

Accountability wing of guberment.

Johnny-come-latelys! &*#^*#($()#$@!

We all remember that the CBO director was 'chosen' by Dorothys' nemesis (WWOTW) and
sheets KKK-man.

Why that'd be Pelosi and Byrd - born to be bad!

Long Ben| 4.25.10 @ 1:04AM

The fat & happy bourgeoisie middleclass is to the radical left as infidels are to radical Mohammedans . The F&HBs; and Infidels are seen as the main obstacle to utopia and /or paradise therefore no tactic in conquering them is seen as dishonorable

Oldefarte| 4.25.10 @ 2:23PM

Simply put, it's WEALTH REDISTRIBUTED WELFARE, all at the TAXPAYERS expense!!!!!!!!!

John3| 4.25.10 @ 11:28PM

Very fuzzy math. These democrats spend the people's money to oppress the people. What an operation!

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James Morgan Puritan Financial| 8.20.10 @ 4:51AM

if all companies stop providing health insurance to their employees, the numbers are staggering

keny| 12.19.10 @ 7:33AM

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