FactCheck.org on the ‘ObamneyCare’ tax

Posted by AzBlueMeanie:

The Arizona Republic should just drop all pretense about being an objective news organization and return to its roots and original masthead, The Arizona Republican. It is, and has always been, the media arm of the Republican Party in Arizona.

On Friday, the Republican published a series of opinions decrying the Supreme Court decision on the Affordable Care Act. So much sturm und drang, so much conservative bedwetting. One unsigned opinion in particular caught my attention. So, we'll be penalized with higher taxes:

The decision affirms that on June 25, 2010, President Obama signed a health-care law that levies a substantial, new set of taxes that, according to congressional estimates, perhaps 75 percent of people earning less than $200,000 per year will pay.

Note the imprecise source citation "congressional estimates." I did a Google search for the source of this claim and, surprise, it comes from Stephen Moore of Rupert Murdoch's Wall Street Journal, one of the most unreliable sources in the business. And why is this opinion not properly attributed to Stephen Moore? Here is the original. Political Diary: The ObamaCare Tax – WSJ.com:

According to Congressional figures 70% to 75% of the "tax" falls on those who earn less than $200,000 per year, and that is 8 million non-rich people. So Mr. Obama argued this was a mandate and a fine to enforce the requirement to buy health care.

Well, that changes everything. The Republican would have you believe that 75 percent of all Americans earning less than $200,000 will be paying more in taxes. That is not what Stephen Moore said. He is saying that of those people who opt to pay the penalty (tax) rather than purchase healthcare insurance, 70% to 75% of them will earn less than $200,000 per year. And that is a relatively small number. This is the game of "fun with facts and figures" to lie to you from The Arizona Republican.

Stephen Moore is an unreliable source, so I am sure as hell not going to take his word for it. It turns out that FactCheck.org has run its fact check of the "ObamneyCare" tax. FactCheck.org : How Much Is the Obamacare ‘Tax’?:

How Many Will Pay?

In his opinion, Chief Justice Roberts cited an estimate from the nonpartisan Congressional Budget Office that 4 million would pay, and cited that as a further reason to consider the assessment a tax rather than a penalty. “Congress did not think it was creating four million outlaws,” he suggested.

However, since then, CBO has increased its estimate. In an estimate released in March of this year, CBO projected that the tax would yield $6 billion for the government, up from the $4 billion it estimated two years earlier. That’s a 50 percent higher total, and would seem to imply that CBO now expects about 6 million will be paying. But CBO didn’t give a specific figure for the number of persons it now expects to pay.

– Brooks Jackson

So Stephen Moore over-estimated by some 2 million people supposedly reading from this same CBO report available to him. He was not nearly as disingenuous as The Arizona Republican, however.

But let's take a look at what the "ObamneyCare" penalty (tax) levy actually is, since that is what is of interest to most people:

How Much?

The minimum amount — per person — will be $695 once the tax is fully phased in. But it will be less to start. The minimum penalty per person will start at $95 in 2014, the first year that the law will require individuals to obtain coverage. And it will rise to $325 the following year.

Starting in 2017, the minimum tax per person will rise each year with inflation. And for children 18 and under, the minimum per-person tax is half of that for adults.

However, the minimum amount per family is capped at triple the per-person tax, no matter how many individuals are in the taxpayer’s household. So, for example, a couple with one child over 18 (or two children age 18 or under), and no coverage, would pay a minimum of $285 in 2014, $975 in 2015 and $2,085 in 2016. And that would be the minimum no matter how many uninsured dependents a taxpayer has.

The tax would be more for persons with higher taxable incomes. When phased in, it will be 2.5 percent of household income that exceeds the income threshold for filing a tax return. For 2011, those thresholds were $9,500 for a single person under age 65, and $19,000 for a married person filing jointly with a spouse. So, to give a rough calculation, a couple with $100,000 of income might pay a tax of $2,025 if they choose to go without coverage.

[This is far less than the average cost of a heathcare insurance plan. Some people may make the cost-benefit analysis to pay the penalty (tax) rather than purchase the more costly healthcare insurance plan.]

But the penalty can never exceed the cost of the national average premiums for the lowest-cost “bronze” plans being offered through the new insurance exchanges called for under the law. We have no way of knowing what that average rate might turn out to be in 2014, but there is reason to think it could be quite high. For example, the total cost of a basic Government Employees Health Association plan currently offered through the Federal Employee Health Benefit program (the model for the state insurance exchanges) totals $9,459 per year for a family plan, and $4,159 for individual coverage.

Update, June 29: The cost of a “bronze” plan could be higher, however. In January 2010 the nonpartisan Congressional Budget Office issued this estimate:

CBO, Jan. 11, 2010: Overall, CBO estimates that premiums for Bronze plans purchased individually in 2016 would probably average between $4,500 and $5,000 for single policies and between $12,000 and $12,500 for family policies.

CBO has not issued any new estimate since that one, according to spokeswoman Deborah Kilroe.

In addition:

[The] tax is assessed for each month that a person is not covered. It is pro-rated, so that a person who is not covered for only a single month would pay 1/12th of the tax that would be due for the full year.

So, for example, the minimum tax per person for failing to get coverage would be $7.92 for each month of 2014, $28.75 for each month of 2015, and $57.92 for each month of 2016, when fully phased in.

Moreover, a number of persons are exempt from the penalty (tax):

Who’s Exempt?

The law makes a number of exemptions for low-income persons and hardship cases.

“Individuals who cannot afford coverage”: If an employer offers coverage that would cost the employee more than 8 percent of his or her household income (for self-only coverage) that individual is exempt from the tax.

“Taxpayers with income below filing threshold”: Also exempt are those who earn too little to be required to file tax returns. For 2011 — as previously mentioned — those thresholds were $9,500 for a single person under age 65, and $19,000 for a married person filing jointly with a spouse, for example. The thresholds go up each year in line with inflation, so those cut-offs will be higher in 2014, when the tax first takes effect.

“Hardships”: The Secretary of Health and Human Services is empowered to exempt others that she or he determines to “have suffered a hardship with respect to the capability to obtain coverage.”

Other exemptions: Also exempt are members of Indian tribes, persons with only brief gaps in coverage, and members of certain religious groups currently exempt from Social Security taxes (which as we’ve previously reported are chiefly Anabaptist — that is, Mennonite, Amish or Hutterite).

Source citations include:

Congressional Budget Office. “Payments of Penalties for Being Uninsured Under the Patient Protection and Affordable Care Act.” 22 Apr 2010.

Congressional Budget Office. “Updated Estimates for the Insurance Coverage Provisions of the Affordable Care Act.” 13 Mar 2012.