Sunday, July 8th, 2012
Since the Supreme Court upheld the Affordable Care Act — or “Obamacare” — a few days ago, rumors have been flying about what will happen next. Be sure to separate fact from fiction before you panic.
The most talked-about part of the Supreme Court’s decision was Chief Justice John Roberts’s opinion that the individual mandate is a tax and is constitutional under Congress’s powers to levy taxes. In some quarters nothing sets off hysteria faster than the “T” word. Dick Polman wrote in the Philadelphia Inquirer:
“The conservative Koch brothers bankrolled an ad calling it “one of the largest tax increases in American history.” A Florida congressman upped the ante, calling it “the largest tax on the American people in history.” Rush Limbaugh went further, calling it ‘the largest tax increase in the history of the world.’”
Wow, that’s pretty scary. Fortunately, it’s not true.
The individual mandate penalty tax itself will be paid only by those people who don’t obtain health insurance. If you get health insurance through your job, through a government program, buy it yourself, or qualify for a hardship exemption, you don’t pay the tax. Not one penny. If you don’t have insurance or an exemption, beginning in 2016, you will be fined, or taxed, $695, or 2.5 percent of income, whichever is greater.
That’s hardly the largest tax increase in the history of the world. Not even close.
Writing in Business Week, Elizabeth Dwoskin points out that there are several tax hikes tucked into the Affordable Care Act, but even all added together they don’t add up to the largest tax increase in anybody’s history.
“If you’re a tanning salon, a medical device maker, a pharmaceutical company, a small business owner who doesn’t want to provide health insurance coverage to your employees, or an individual who refuses coverage, you’re going to have to cough up more money to the IRS in the form of penalties, fees, and yes, taxes,” Dwoskin writes.
However, “If you’re just about anyone else, the health-care law is likely to be a net plus.” This means that the overall cost of your health care, including insurance, should flatten out and leave you with more money in your pocket, not less. It’s very possible that Obamacare will be a net cost savings for you, whether you are healthy or suffering catastrophic illness such as mesothelioma.
The Washington Post has a nifty chart showing how all the “Obamacare” taxes added together compare to other tax increases in American history. The Obamacare taxes are roughly equal to the tax increase of 1990, enacted during the George H.W. Bush administration. It is somewhat less than President Bill Clinton’s tax increase of 1993. It is considerably less than Ronald Reagan’s tax increase of 1982.
Yes, Reagan increased taxes. If you’re curious — the single biggest tax hike on the chart was the Revenue Act of 1951. Somehow, America survived.
Accompanying the hysteria over the largest tax increase in the history of the world is a claim that the IRS has gone on a hiring frenzy, adding either 16,500 or 200,000 new agents to collect the tax. In some versions of these stories, the agents will be armed. Note that even the conservative Forbes magazine calls these stories “nutty Internet rumors.”