Tuesday, March 27, 2012

Can Congress Stick You for $695 a Year?

If you cut through all the long-winded legal arguments, the Obamacare individual mandate comes down to Internal Revenue Code section 5000A:

(a) Requirement To Maintain Minimum Essential Coverage.

An applicable individual shall for each month beginning after 2013 ensure that the individual, and any dependent of the individual who is an applicable individual, is covered under minimum essential coverage for such month.

(b) Shared Responsibility Payment.

(1) In general. If a taxpayer who is an applicable individual, or an applicable individual for whom the taxpayer is liable under paragraph (3), fails to meet the requirement of subsection (a) for 1 or more months, then, except as provided in subsection (e), there is hereby imposed on the taxpayer a penalty with respect to such failures in the amount determined under subsection (c).

(2) Inclusion with return. Any penalty imposed by this section with respect to any month shall be included with a taxpayer's [income tax return]...
If you don't have the MEC (minimum essential coverage), you have to pay the SRP (shared responsibility payment). The statute goes on and on with lots of other rules, prorations, limits, exceptions, and exemptions, but the bottom line is that the SRP penalty amount will be $695 a year (indexed annually for inflation) or 2.5% of income, whichever is greater.

Now, I have little doubt that the U.S. Congress can stick you for another 2.5% of income tax. They do that sort of thing all the time, raising and occassionally lowering the income tax rates. But can they stick you for $695?

Obviously, Congress could stick you for the $695 if they were sufficiently clever about it. They could have raised the income tax rates by 2.5% and then let people who have bought MEC subtract the $695 from their taxes. They wouldn't have to make Section 5000A(a) mandatory to do that. The individual mandate could be optional, so long as 5000A(b) was there to collect the money if you don't get the MEC.

So I am afraid, at the end of the day, the arguments that the individual mandate is unconstitutional come down to whether Congress made a bad job of it when they passed Obamacare. Of course, we know they did. What kind of a name is Section 5000A for the Obama Presidency's signature piece of legislation? A is for afterthought or maybe just athought, as there seems to have been an absence of sufficient thought. Harry Reid and Nancy Pelosi, if that's the best you can do, you're fired.

Case closed.

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