Justin Sykes

Conservative Governors Remain Opposed to Obamacare's Medicaid Expansion

Posted by Justin Sykes on Thursday, July 5th, 2012, 3:46 PM PERMALINK

In an article published by the Hill today, 15 Governors were described as expressing opposition to the Medicaid expansion under Obamacare. Half of these Governors have out rightly stated they will not choose to participate in the Medicaid expansion.

Most of those in opposition to the Medicaid expansion cite budget cuts in education and tax increases which will be necessary to sustain such a massive overhaul as their motivation.

Nebraska Governor Dave Heinemen released a statement last week citing his concern that the expansion will cause budget shortfalls, such that if the Medicaid expansion were implemented, "aid to education and funding for the University of Nebraska will be cut or taxes will be increased."

Florida Governor Rick Scott has also made it clear Florida will not participate in the Medicaid expansion, stating "Florida will opt out of spending approximately $1.9 billion more taxpayer dollars required to implement a massive entitlement expansion of the Medicaid program." In a press release following the Supreme Court ruling, Governor Scott cited job creation and cuts to education spending as his primary concern in opposing the Medicaid expansion.

Governor Scott Walker of Wisconsin released a statement following the ruling in which he outlined concerns that Wisconsin's participation in the Medicaid expansion would not only drive up the cost of health care for citizens of Wisconsin, but that participation would "increase the size and cost of government, decrease the quality of health care and, in our state, reduce access for those truly in need of assistance."

Kansas Governor Sam Brownback has also joined the fight against implementing Obamacare's Medicaid expansion, stating on the Governor's website that "stopping Obamacare is now in the hands of the American People. It begins with electing a new president this fall."

Similar to Governor Brownback's call to arms, Governor Bobby Jindal of Louisiana made it clear that "the American people did not want or approve of Obamacare then, and they do not now. Americans oppose it because it will decrease the quality of health care in America, [and] raise taxes."

Governor Terry Branstad of Iowa expressed passionate opposition to the idea of Iowa participating in the Medicaid expansion, stating in a recent press release that "the Supreme Court handed down a disastrous decision to uphold President Obama's destructive health care law, which means a future of higher costs, higher taxes, and increasing debt for Iowans."

In a letter to Senator Jim Demint, Governor Nikki Haley wrote that "South Carolina stands with you and your cosigners in opposing implementation of state-based insurance exchanges." Governor Haley's letter references Senator Demint's efforts to oppose the expansion within Congress.

In addition to the Governors cited above, the Governors of Alabama, Georgia, Indiana, Mississippi, Missouri, Nevada, Texas, and Virginia have informally joined in the opposition to the Medicaid expansion under Obamacare.

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Will President Obama Add 3,690 IRS Bureaucrats to Enforce Obamacare?

Posted by Justin Sykes on Monday, July 2nd, 2012, 2:51 PM PERMALINK

According to President Obama's Budget for the coming year, the Obama Administration is planning to add an additional 3,690 new full-time employees to the Internal Revenue Service payroll.

This means that in 2013, President Obama will now have 96,203 IRS bureaucrats available to enforce and oversee the implementation of Obamacare.

IRS: Full-time Employment Requests

IRS Programs: 2011 Actual 2012 Estimated 2013 Estimated
Taxpayer Services      
Direct civilian full-time employment 31,603 30,601 30,636
Reimbursable civilian full-time equivalent employment 515 476 476
Allocation account civilian full-time equivalent employment ... 139 ...
Direct civilian full-time employment 50,142 47,716 51,713
Reimbursable civilian full-time equivalent employment 161 161 161
Allocation account civilian full-time equivalent employment ... 133 7
Health Insurance Tax Credit Admin.      
Direct civilian full-time employment 13 ... ...
Operations Support      
Direct civilian full-time employment 12,439 11,985 12,609
Reimbursable civilian full-time equivalent employment 106 106 106
Allocation account civilian full-time equivalent employment ... 591 ...
Business Systems Modernization      
Direct civilian full-time employment 512 605 495
Therapeutic Discovery Program Grants & Admin.      
Direct civilian full-time employment 10 ... ...
Totals each year: 95,501 92,513 96,203

(The Appendix, Budget of the United States Government, Fiscal Year 2013)







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The ACA: A Tax disguised as a Penalty

Posted by Justin Sykes on Monday, July 2nd, 2012, 12:12 PM PERMALINK

As poet James Whitcomb Riley wrote, if it looks "like a duck, swims like a duck, and quacks like a duck, call that bird a duck." The individual mandate upheld by SCOTUS last week not only looks like a tax, functions like a tax, but it is also enforced like a tax. Any cleverly veiled description of the individual mandate as a "penalty" and thus not a tax, blatantly overlooks the fact that it is a tax.

Thanks to Congress' legal contortions of our system of jurisprudence, the individual mandate has been allowed to limbo under the bar of judicial standing as just a "penalty," and find sanctuary as a "tax" in the arms of Article I Section 8 of the Constitution.

To clarify, there are two key points which the Government and its legal counsel advance, which amount to hypocritical interpretations of their own legislation. First, in order for SCOTUS to hear the challenge to the ACA, the Government had to show that the penalty contained in the legislation was not a tax, such that it is not barred by the Anti-Injunction Act. Second, the method in which the Government was able to successfully argue the merits of the ACA and the penalty it contains, was to prove that Congress could enact such legislation through its power to tax. In short, to get the case heard the penalty is not a tax, yet to get the legislation passed, the penalty is a tax.

Prior to examining the merits of the case, the Government had to overcome the Anti-Injunction Act's bar of suits brought "for the purpose of restraining the assessment or collection of any tax." In other words, for purposes of standing, the ACA's penalty had to be shown by the Government not to be a tax. If the penalty was shown to be a tax, the parties would not have had standing, as the tax is not yet in place and thus no cognizable injury is realized, such that there is no injury or issue for the court to rule on.

Because opposing council on both sides of the health care debate refused to argue that the penalty was a tax, SCOTUS was forced to appoint its own outside council or "amicus curiae" to argue for the penalty being a tax. To quote the court appointed council, "even though Congress did not label the shared responsibility payment a tax, we should treat it as such under the Anti-Injunction Act because it functions like a tax." The amicus brief further states, the penalties "shall be assessed and collected in the same manner as taxes."

However compelling the argument that the penalty is a tax, and thus barred by the Anti-Injunction Act, SCOTUS found for purposes of standing, the language crafted by Congress evidenced a penalty, not a tax, and the suit was not barred from being heard on the merits.

Once the Government was able to overcome the hurdle of the Anti-Injunction Act, however, their approach took an immediate 180. The Government was prepared with two arguments: (1) First, that Congress had the power to enact the mandate under the commerce clause; and (2) Second, "that if the commerce power does not support the mandate, we should nonetheless uphold it as an exercise of Congress' power to tax."

At first glance, these arguments seem destined to fail, and indeed SCOTUS found Congress could not enact such legislation under its first argument as the Commerce Power did not provide for such legislation. However, the second argument, that Congress could enact such legislation under its Power to Tax, was successful. To any layperson this seems odd, as the Government's principle argument, which allowed the legislation to pass the bar of the Anti-Injunction Act, was that the penalty was not a tax. Yet, the Government's principle argument in seeking to enact the legislation was that it was a tax and as such Congress could enact the legislation under its Power to Tax.

The Government was thus able to get the ACA in to court as a penalty, not a tax, while simultaneously getting the ACA passed by arguing the penalty was, for all intents and purposes a "tax."

While the Government's argument is an impressive display of legal gymnastics, it opens our legal system up to situations in which Congress can hypocritically craft two versions of the same legislation in a manner that benefits the passage of legislation, even though it is based on two contrary and conflicting logical interpretations.  

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Why the ACA will fail absent the individual mandate

Posted by Justin Sykes on Wednesday, June 27th, 2012, 4:49 PM PERMALINK

On Thursday, June 28th SCOTUS will give a final opinion the Patient Protection and Affordable Care Act (ACA). The drastic and sweeping effects of this ruling will decide the future of American Healthcare and Congress' ability to force American citizens to buy a product from a private company.

Stemming from the 11th Circuit's ruling in 2011, which held that the individual mandate is unconstitutional, the Supreme Court is poised to rule on the issue of severability. In order to determine the severability of the individual mandate, SCOTUS will look to the legislative intent of Congress in enacting the ACA.

As put forth by the American Center for Law & Justice in its amici curiae brief, Congress did not intend the ACA to go forward absent the individual mandate. Two obvious issues are inherent with the notion that the ACA could go forward without the mandate: (1) The severability provision contained in the first Affordable Health Care Act was consciously removed from the final version of the ACA while the individual mandate provision remained in both; and (2) "Congress could not have intended a constitutionally flawed provision to be severed from the remainder of the statute" where the legislation itself would be incapable of functioning properly and effectively without the mandate.

The effects of severing the mandate would be catastrophic to health insurance companies. If the individual mandate is severed from the ACA, "the Act is projected to impose a total net cost of $360 billion on health insurance companies from 2012 through 2021." Without the individual mandate, the cost to insurance companies imposed by the ACA would include $77 billion over ten years stemming from the "slacker mandate", $90 billion in excise taxes on health insurers, and $218 billion as a result of the "Cadillac" tax.

Yet the inevitable cost of advancing the ACA absent the mandate will not fall squarely on the shoulder of health insurers. For consumers, "a steep increase in insurers' costs would necessarily result in an increase in premiums" charged to consumers. Additionally, "hospitals and drug manufacturers face reduced reimbursement for certain Medicare expenditures" likely resulting in increased costs being passed to consumers.

Thus, the individual mandate is fatally necessary for the ACA to have any possible effect in line with Congress' intent. The 2011 holding by the 11th Circuit, in which it found the individual mandate to be an unconstitutional violation of Article I of the U.S. Constitution lends no aid to preserve what remains of this failed legislation.

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Baucus vs. Ryan on Tax Reform

Posted by Justin Sykes on Tuesday, June 12th, 2012, 5:01 PM PERMALINK

In a press release Monday, Senate Finance Committee Chairman Max Baucus (D-Mont.) likened the U.S. tax code to Hydra, the "mythical Greek beast." While the complicated U.S. tax code is reminiscent of an ancient multi-headed water beast, Senator Baucus' suggested methods of slaying such beast will prove ineffective.

Senator Baucus' goals for tax reform suggest measures of increased spending and revenue. While in line with the tax reform measures of the Obama Administration, Baucus' means of achieving such goals run contrary to the budget proposed by the House Budget Committee Chairman Paul Ryan. As stated in the Ryan Budget, "Washington has a spending problem, not a revenue problem."

By analyzing the reforms of Baucus, Obama and Ryan against the backdrop of the three Reagan Criteria for tax reform, it is evident the increased spending and revenue measures suggested by Baucus and Obama are not the logical solutions for tax reform in the U.S.

1. Fairness

Singling out and imposing higher taxes on one group of taxpayers is contrary to any interpretation of fairness, and is not likely to make any substantial progress in reducing the deficit or raising revenue.

  • Baucus' plan for reform alludes to a tax increase on the "top one percent of taxpayers" much like The Buffet Rule.
  • The Obama Administration's Buffet Rule imposes a tax on families earning $1 million or more.
  • In line with the criteria for fairness, the Ryan Budget focused instead on closing loopholes and deductions in order to promote fairness in the tax code, as opposed to increasing taxes.

2. Efficiency

The Baucus and Obama tax reform measures reflect a lack of efficiency, especially with regard to U.S. corporations. In Baucus' press release, he references the ever growing inadequacy of the U.S. tax system and its corporate income tax rates, which as Baucus states are "the highest statutory corporate tax rates in the world."

  • Even so, Baucus' measures hinge on increasing "tougher rules against shifting profits" while ignoring the fact that the real reason the U.S. is losing corporate investment is the high tax rates imposed by the government.
  • Additionally, the Obama Administration is seeking to impose taxes on the Medical Device Industry in 2013, further exacerbating the problem of companies shifting their operations abroad to countries with low corporate tax rates such as Japan.
  • The Ryan Budget sets forth a transition to lower the corporate income tax rate to 25 percent and end the "double taxation" of corporate business profits to encourage domestic investment by multinational corporations.

3. Complexity

The complexity of the U.S. tax code contributes to both its lack of fairness and inefficiency.

  • Under Obama, the complexity of the U.S. tax code will be further increased in 2013 once the effects of Taxmageddon are felt, which will include a $4.5 trillion tax increase, the impact which would be felt instantaneously by U.S. workers.
  • In addition to the complexities increased by Taxmageddon legislation is that the current "total cost of complying with the individual and corporate income tax amounts to over $160 billion per year."
  • In order to increase efficiency of the U.S. tax code, the Ryan Budget seeks to consolidate the current six individual income tax brackets into just two lows brackets at just 10 and 25 percent, in addition to repealing the AMT.

As Senator Baucus stated in his press release Monday, the "need to overhaul the U.S. tax code seems obvious." Yet neither Senator Baucus nor President Obama seem to be on track with their proposed tax reform measures. In order to slay the mythical beast that has become the U.S. tax code, both Baucus and Obama should take note of the fairness, efficiency, and simplicity inherent in the Ryan Budget. 

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Obamacare's Medical Device Tax Kills Jobs

Posted by Justin Sykes on Tuesday, June 5th, 2012, 11:20 AM PERMALINK

Following close on the heels of the latest dismal jobs report this week is a House vote to repeal the Medical Device Tax. The Protect Medical Innovation Act, or H.R. 436, was introduced by Representative Erik Paulsen (R-MN) and thanks to bipartisan support, including 233 co-sponsors, was approved by the Ways & Means Committee by a vote of 23-11 last week. H.R. 436 will now go to the House floor for a vote sometime this week.

H.R. 436 seeks to repeal the Medical Device Excise Tax included as part of Obamacare legislation. As part of the Obamacare bill, a 2.3 percent tax increase on medical device manufacturers will begin in 2013, and could equate to $29 billion in additional taxes on medical device manufacturers, a cost which will inevitably be passed to the consumer. As H.R. 436 proceeds to the floor this week for a vote, House members on both sides of the aisle should vote in support of this repeal effort in order to protect healthcare manufacturing jobs, the healthcare manufacturing industry, and innovative efforts to improve healthcare in the United States.

The Employment Situation Summary released by the Bureau of Labor Statistics last week evidenced a stagnant unemployment rate of 8.2 percent under President Obama. However, the two sectors showing upward trends in employment, healthcare and manufacturing seem to be the targeted industries under Obamacare. Last month the healthcare industry added 33,000 jobs, with the manufacturing sector adding an additional 12,000 jobs to the labor force for a total of 45,000 jobs. If the Medical Device Tax goes forward this week, "the tax could result in job losses in excess of 43,000." The Medical Device Tax under Obamacare would not only work a direct burden on job creation, but would also work a hardship on the Medical Device Manufacturing Industry and create a virtually impenetrable economic barrier to innovation, placing most innovators in the red.

The industry as a whole would suffer as the Medical Device Tax would make for a $3 billion increase in taxes paid by medical device firms. The tax increase would cripple domestic medical manufacturers, leading to cost-cutting measures including job loss and outsourcing of medical manufacturing jobs and plants. Additionally, the $3 billion tax increase would inevitably lead to manufacturing costs being passed along to consumers and patients leading to increases in the costs of everything from bedpans to tongue depressors.

The effect the Medical Device Tax would have on innovators in the medical field is that medical device manufacturers may end up paying taxes on "devices sold at a loss." For example, Analogic, which specializes in innovative medical technology production, earned $3.7 million in net income last year. Under Obama's Medical Device Tax, Analogic would have paid roughly $7.5 million in taxes last year, amounting to a $3.8 million loss. The effect of this tax is unsustainable, killing innovation and jobs.

Thus, the negative effect the Medical Device Tax under Obamacare would have would be to discourage medical innovation, while also cutting job growth in two industries vital to the American economy. House members should vote in support of H.R. 436 this week in an effort to support American job growth and encourage medical innovation in the United States.

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