U.S. Supreme Court Chief Justice John Roberts called a penalty a tax before upholding it. President Obama called a tax a penalty in defending it. GOP presidential candidate Mitt Romney is now calling the health care tax he signed in Massachusetts a penalty so he can criticize Obama’s penalty as a tax.
But what’s strangest of all is that for many people these word games actually matter.
Coercion abounds. The t-word is back in the headlines now that the Supreme Court has ruled that Obamacare is constitutional under the power of Congress to levy taxes. So the cries have gone up to repeal this government coercion while ignoring the arm-twisting already in place.
Most people get their health care coverage from their employers, thanks to tax breaks that are the linchpin of this system. The government forgoes about $200 billion annually in tax collections to promote wider health care access. That’s how most of us are covered. Coercion? Sure. If this pile of money were spent on something else, it would be taxed.
Another large group of people is covered under a mandate known as Medicare. When the payroll tax was imposed, the government, in essence, said you will buy health insurance for your retirement years. “What else is the government going to make us buy?” asked the critics at the outset. Those slippery-slope fears quickly vanished. Good luck trying to repeal it now.
Then in 2003, it got even better for the elderly. Congress passed a prescription drug benefit that became available three years later. However, this didn’t occur without a fight. One faction wanted to limit the cost to $400 billion over the first decade. Another was willing to exceed that. What wasn’t on the table was how to finance this massive new government program. The bill was a few votes shy of passage, so Congress held the vote open into the wee hours as Republican leadership pressured some of the holdouts. A couple of them, including small-government hero Butch Otter, eventually caved.
Now, Medicare Part D adds to the deficit daily, but this is not the health care program that is being targeted for repeal. The lesson is clear: If you’re going to start a big government program, don’t pay for it. Because avoiding the t-word is what passes for fiscal conservatism these days.
The hidden tax. While it’s true that politicians are mortified with taxation, it doesn’t mean they’re troubled with cost-shifting and wealth redistribution. The hidden tax in the current health care system amounts to about $1,000 a year for people who pay for their insurance. That’s because some of the cost of treating the uninsured gets passed along in the form of higher medical prices and insurance premiums. The rest is absorbed by hospitals and health care providers.
But because the Supreme Court hasn’t handed down a ruling that characterizes this transfer as a tax, it’s apparently worthy of preservation.
When the penalty under Obamacare begins in full, “free riders” will face a financial hit for not buying insurance. Studies show that almost every uninsured person gets health care services, but many do not pay for it. To the extent that these folks buy coverage or pay the penalty, the burden on the rest of us eases.
The Brookings Institution estimates that about 2 percent of the population will pay the penalty, which is now being called a massive middle-class tax increase.
Shifty. Some governors say their states won’t participate in the new Medicaid program aimed at covering more poor people. Under the new law, the feds would pick up 100 percent of the costs. Eventually, it drops to 90 percent, which is still a smoking deal.
Uninsured people will get health care whether they’re covered or not. Denying them Medicaid coverage just means the cost-shifting to the insured population and health care providers will be greater in those states.
But, hey, at least it isn’t called a tax.
The Wednesday Slice question
Have you ever sent an email to someone who had recently passed away (even though you had heard the sad news before you sent your message)? What did you say?
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