The Spectacle Blog

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

By 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.

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