Affordable Care Act's Unaffordable Taxes

The President and his surrogates have always denied that the health care reform law raises taxes, despite the ‘penalty’ levied on those who fail to comply with the individual mandate. The Supreme Court recently ruled that the mandate is only constitutional as a tax, proving those claims to be false on their face. Now that it has been upheld by the Court, it seems that the IRS is prepared to go forward collecting dozens of new or higher taxes.

Many of those taxes are going to have a huge impact on the middle class. The detested individual mandate has now become a tax penalty on those who “choose” to go without health insurance. Of course, few people truly choose not to have health insurance; most who don’t simply can’t afford it. The Affordable Care Act won’t fix this problem; in fact it will only make it significantly worse.

It’s typical of the way government programs work, but the most likely outcome seems to be that many of the poor will qualify for expanded Medicaid subsidies that will get them insurance fulfilling their tax obligations. The middle class probably won’t be allowed to sign up for those things, but they will be paying for them. Individuals or families who can’t afford coverage complying with the regulatory burden of PPACA will be zapped with tax penalties that can go up into the thousands of dollars, just to add insult to injury.

There are a handful of new taxes aimed at reducing the attractiveness of alternatives to participating in the exchanges or signing up for a government program. Increased tax penalties on Health Savings Accounts and Flexible Spending Accounts will make it more difficult for those who like to pay out of pocket for health care or have special needs children. For some reason, so-called “Cadillac” health care plans will also be taxed at a rate of 40%, even though that seems inimical to the stated goals of the law’s supporters.

All of this, and White House Press Secretary Jay Carney says, “It’s a penalty, because you have a choice. You don’t have a choice to pay your taxes, right?” The distinction might be important for purposes of public relations, but in terms of logic it constitutes a false dichotomy. Make no mistake, the penalty is a tax. And it will affect the middle class, despite the President’s claims to the contrary.