ObamaCare Thwarts Tax Reform


When candidate Obama was campaigning in 2008, he repeatedly promised the American people that he would not raise any taxes on any family with an income of less than $250,000.  (Read my lips: no new taxes for the lumpenproletariat.)  When asked on ABC News about whether the mandate to buy health insurance in the new health care bill was actually a tax, President Obama vociferously denied that it was.  But when the constitutionality of ObamaCare was challenged in court, Obama allowed his lawyers to deploy the backup argument that it really is a tax after all.  And in that recently concluded case (NFIB v. Sebelius), the Supreme Court ruled that the only way ObamaCare could be upheld is if the penalty for noncompliance with the mandate is read as a tax for not owning health insurance.  Do you feel snookered?

Given the Court's ruling, if one doesn't own health insurance and one owes any income tax at all, then one owes more income tax -- a minimum of $695 more.  But that tax is preferable to paying insurance premiums, which averaged $15,073 in 2011 for family coverage.  At Forbes, Michael Strain of the American Enterprise Institute points out that what the Court has given us is a choice, and that choice will increase "adverse selection" in the insurance market, which will drive up the price of premiums.  Strain's article also explores the psychology involved in the new choice the Court created when it transformed the penalty into tax:

Given the small penalties, will people comply[?] ... Under ObamaCare a person cannot be denied coverage or charged a [higher] premium because of being sick or injured at the time of applying for insurance.  So it will be much cheaper for the uninsured to remain that way and pay the penalty, which will usually be much smaller than the cost of insurance, and then delay purchasing protection until they actually need healthcare.

But even if ObamaCare had been found constitutional as enacted, Obama has still reneged on his tax pledge.  As reported by Grover Norquist in The Washington Times, ObamaCare creates at least 20 new taxes.  "Obamacare was supposed to reduce the cost of health insurance but it has six taxes on Americans who already have health insurance."

With ObamaCare alone, Obama has raised taxes on all Americans.  And those tax hikes are not just the tax on those who choose to pay the tax for not owning health insurance, but also all the other ObamaCare taxes on medical devices and drugs that get incorporated into the price of health care and thereby into the price of health insurance.  When Obama signed ObamaCare into law, did he not realize that he was raising everyone's taxes, or did he calculate that because he was giving "free" health care to the masses, voters would give him a pass on his broken promises?

Although his campaign motto is "Forward," the president's direction for the country on taxes is anything but.  Indeed, Obama wants to permanently lock America into the tax system we have.  When many Americans cry out for reform of our broken tax system, Obama gives us a heaping helping of more of the same.  Rather than "Change," the president's 2008 motto should really have been "Stasis."

Why would any politician want to retain a system despised by so many?  It's because our current tax system allows government to control the People -- do what Congress wants you to do, and you get a tax break.  Buy health insurance, buy a Chevy Volt, take out a loan, make a donation to some entity that Congress approves of, and you pay less in taxes.  ObamaCare is a continuation of Congress's practice of awarding certain behaviors and decisions with tax favors.  So we have an incompetent Congress -- that can't even pass a constitutional law and for which most Americans have very low regard -- that is deciding who doesn't have to pay taxes.

It may sound odd, but the character of our tax system can be understood only when one takes into account the exceptions in it.  These exceptions consist of all the exemptions, deductions, write-offs, loopholes, etc. in the tax code that lower one's tax bill.  To maintain revenue levels, exceptions force tax rates to be higher.  When a Robert Reich urges a top tax rate of 70 percent, it's understood that no one will actually pay such an absurd, confiscatory rate because there'll be exceptions to take advantage of.

What's disturbing about ObamaCare is that it reinforces our current tax system, diminishing the odds of reform.  At a time when many Americans want to junk the entire system (including the IRS) with the FairTax, or to vastly simplify the tax code with a flat tax, Obama doubles down on what America hates, with more new taxes, more complication, higher rates, and perhaps the hiring of many new IRS agents just to police ObamaCare.  Welcome to ObamaLand.

If should be clear: President Obama doesn't want to reform the tax system.  That's why he ignored the recommendations of his own Simpson-Bowles commission.  Obama wants to forever mire taxation in a system of exceptions and gimmicks that politicians can use to buy votes.  The inequity of this system is that some taxpayers have to make up for the lost revenue.

Democrats simply don't want simpler, fairer taxes.  But if one belongs to the lumpenproletariat, one doesn't worry about all the new ObamaCare taxes, much less tax reform, because one doesn't pay income taxes.  Way to go, comrade.

Jon N. Hall is a programmer/analyst from Kansas City.

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