AP: Coverage requirement enforced with tax

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By RICARDO ALONSO-ZALDIVAR (AP) – 1 day ago

WASHINGTON — Memo to President Barack Obama: It's a tax.

Obama insisted this weekend on national television that requiring
people to carry health insurance — and fining them if they don't —
isn't the same thing as a tax increase. But the language of Democratic
bills to revamp the nation's health care system doesn't quibble. Both
the House bill and the Senate Finance Committee proposal clearly state
that the fines would be a tax.

And the reason the fines are in the legislation is to enforce the
coverage requirement.

"If you put something in the Internal Revenue Code, and you tell the
IRS to collect it, I think that's a tax," said Clint Stretch, head of
the tax policy group for Deloitte, a major accounting firm. "If you
don't pay, the person who's going to come and get it is going to be
from the IRS."

Democrats aren't the first to propose that individuals be required to
carry health insurance and fined if they refuse. The conservative
Heritage Foundation called for such a mandate in the 1990s' health
care debate, although its proposal differed from the ones pending in
Congress. Heritage has since dropped the idea and now favors using tax
credits to encourage people to buy coverage — carrots and not sticks.

During the 2008 political campaign, Obama opposed making coverage
mandatory because of the costs. His position has shifted now that it's
becoming clear such a requirement will be part of any legislation that
Congress sends him. Conservative activists are calling it a violation
of his pledge not to raise taxes on the middle class.

"This is exactly what George Bush Sr. did when he said he wouldn't
raise taxes, and it cost him the next election," said Grover Norquist,
president of Americans for Tax Reform. "Obama is doing the same thing,
but he's insulting people by telling them that if you don't call it a
big purple banana, somehow it wouldn't be a tax."

Some liberals acknowledge that Obama might be vulnerable on the
insurance requirement. But they say most people will understand as
long as the legislation provides enough of a subsidy to make the
coverage affordable. That's a central issue this week as the Senate
Finance Committee starts voting on legislation.

"I think it's a metaphysical question as to whether it's a tax or
not," said Roger Hickey, co-director of the Campaign for America's
Future. "The real question that will determine whether people are
upset is whether the insurance is affordable."

In an interview that aired Sunday on ABC's "This Week," Obama insisted
that the insurance requirement is not a tax.

"For us to say that you've got to take a responsibility to get health
insurance is absolutely not a tax increase," the president said. "What
it's saying is...that we're not going to have other people carrying
your burdens for you anymore.

"Right now everybody in America, just about, has to get auto
insurance," Obama added. "Nobody considers that a tax increase.

"You just can't make up that language and decide that that's called a
tax increase," he added.

But a Democratic staff description of Sen. Max Baucus' bill calls the
proposed fines an "excise tax." Penalties of up to $950 for
individuals and $3,800 for families would be imposed on those who
don't get coverage. Sen. Kent Conrad, D-N.D., said Monday he expects
the family penalty to be slashed in half to $1,900.

The House bill uses a complex formula to calculate the penalties,
calling them a "tax on individuals without acceptable health care
coverage."

The coverage mandate is part of a political bargain under which the
insurance industry would agree to take all applicants, regardless of
prior medical history.

"If we're going to have coverage without regard to pre-existing
conditions, it makes sense," said economist Roberton Williams of the
Tax Policy Center. "Otherwise people will come in the door the day
they get sick." He sees no distinction between the requirement to get
coverage and the fines themselves.

"The fact that it is imposed on people and they have no choice in
paying it, and the fact that it's administered through the tax system
all make it look like a tax," Williams said. The center is a joint
venture of the Urban Institute and the Brookings Institution.

It wouldn't be the first asterisk added to Obama's campaign pledge on
taxes. Earlier this year, he signed a tobacco tax increase to pay for
children's health insurance. Even that can be read as a violation of
his expansive campaign promise.

"I can make a firm pledge," he said in Dover, N.H., on Sept. 12, 2008.
"Under my plan, no family making less than $250,000 a year will see
any form of tax increase. Not your income tax, not your payroll tax,
not your capital gains taxes, not any of your taxes."

He repeatedly promised "you will not see any of your taxes increase
one single dime."

Copyright © 2009 The Associated Press. All rights reserved.