Obamacare's Individual Mandate<br> Penalty Is a Tax


Posted by Ryan Ellis on Tuesday, February 23rd, 2010, 1:44 PM PERMALINK

A close reading of President Obama's healthcare plan finds several terms to describe the tax Americans will pay if they choose not to purchase qualifying health insurance.  These terms include "payment," "assessment," and "individual responsibility."

This same tax has also variously been referred to as a "penalty," a "fee," or a "fine."

In fact, it's none of those things, precisely.  It's a tax.  The various synonyms used are designed to hide that simple fact.  The reason for wanting to do so is clear: since this tax would be assigned to any uninsured American (including those making less than $250,000 per year), it's a pretty apparent violation of the President's promise not to raise "any form" of taxes on working families.

The evidence that this tax on the uninsured is in fact a tax comes from a thorough reading of the Senate healthcare bill's uninsurance tax section (which the Obama plan specifically says it is starting from).

Page 322 of the Senate bill (the "Patient Protection and Affordable Care Act") says that "any penalty imposed by this section with respect to any month shall be included with a taxpayer's return under Chapter 1 [of the Internal Revenue Code (IRC)] for the taxable year which includes such month."  The procedure to collect the tax on page 336 of the bill references Chapter 68 of the IRC.  On page 337 of the bill, a new Chapter 48 is added to Subtitle D of the Code (Miscellaneous Excise Taxes) in order to create the uninsurance tax.  Page 341 of the bill continues to reference various parts of the Code that need to be amended in order to cover this new tax.

Anyone reading this precise legislative language can see how this tax would be collected.  An uninsured individual would add the excise tax to their regular income tax burden on the 1040 Form every April.  It is much like other excise taxes collected on the 1040 (early IRA withdrawal tax, for example).

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