ObamaCare: Taxing the uninsured

Keith Hennessey has done a little digging into the House method of paying for health-care reform and sees some significant sleight-of-hand in the details.  Barack Obama says that he wants to provide health-care coverage for all Americans without raising taxes on anyone under $250,000.  Keith points out that the proposal in fact does tax people who make less than the Obama definition of rich, and significantly:

As expected, the House bill would mandate that individuals and families have or buy health insurance.

But what if they don’t buy it?

Then Section 401 kicks in.  Any individual (or family) that does not have health insurance would have to pay a new tax, roughly equal to the smaller of 2.5% of your income or the cost of a health insurance plan. …

I assume the bill authors would respond, “But why wouldn’t you want insurance?  After all, we’re subsidizing it for everyone up to 400% of the poverty line.”

That is true.  But if you’re a single person with income of $44,000 or higher, then you’re above 400% of the poverty line.  You would not be subsidized, but would face the punitive tax if you didn’t get health insurance.  This bill leaves an important gap between the subsidies and the cost of health insurance.  CBO says that for about eight million people, that gap is too big to close, and they would get stuck paying higher taxes and still without health insurance.

This doesn’t just amount to a slight gap in the net that allows a few oddball cases to slip, either.  Keith provides two scenarios, both entirely plausible, to demonstrate how the CBO determined that eight million people — around 20% of the current uninsured — would likely end up with no insurance and higher taxes.  The mandate in the bill would force people to choose between paying the taxes or paying as much as three times as much for health insurance, assuming a family plan.

The House plan may not live for very long, anyway.  The Senate doesn’t want to impose taxes at all if they can get away with it, especially not the Charlie Rangel “soak the rich” taxes the House proposes:

But the plan has drawn sharp attacks from Republicans and is already creating friction with Democrats in the Senate.

“Tax is a four-letter word” with voters, said Sen. Ben Nelson (D-Neb.). Even families not ranking in the top 1 percent of earners “hope they’re going to be there someday,” he said. “So they don’t necessarily think it’s fair.”

Senate negotiators have all but abandoned plans to directly tax the wealthy and are focusing instead on an array of smaller, more narrowly targeted revenue measures that would raise money from drug and insurance companies, as well as individuals and corporations. A tax on employer-provided health benefits remains part of that discussion, but Sen. Kent Conrad (D-N.D.), who is promoting a tax on the most generous 1 percent of private plans, conceded yesterday that such a proposal is “a very tough sell.”

Why?  Doesn’t everyone hate the “rich” these days?  Not exactly.  As John Boehner points out, many of the so-called “rich” above $250K a year in earnings are small-business owners who simply file their business revenues as personal income.  A 5.4% “surtax” — really just a hike in the upper tax bracket — will take more of their capital out of their businesses and reduce the opportunity for job growth.

The Post notes that the “surtax” would apply to about 2.1 million Americans.  The mandate for coverage will force almost four times as many middle-class Americans to pay higher taxes as a result of the ObamaCare plan in the House while preventing them from getting coverage.  The House hasn’t soaked the rich; they’ve declared war on the middle class and the uninsured.