Barack Obama revealed a curious lack of understanding of the word tax in his media blitz last Sunday, as he fought to keep his health-care overhaul alive. George Stephanopoulos of ABC News asked the President about the Baucus health-care overhaul bill and its individual mandates, which Obama had opposed as a presidential candidate, and the conversation turned towards taxation. When Stephanopoulos wondered whether the penalties that enforce the mandate meant that Obama would break his promise not to add one dime of taxes to the middle class, Obama insisted that Stephanopoulos was “stretching” the notion of taxes:
“No. That’s not true, George. The — for us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase. What it’s saying is, is that we’re not going to have other people carrying your burdens for you anymore than the fact that right now everybody in America, just about, has to get auto insurance. Nobody considers that a tax increase. …[Y]ou can’t just make up that language and decide that that’s called a tax increase.”
First, everybody does not have to buy auto insurance, since everybody doesn't have a drivers license. The mandates from the individual states apply to those who want to access the publicly-owned system of roads in their states, for which the states have the jurisdiction to set requirements, such as demonstrable expertise in handling a car and knowledge of the laws governing driving – and liability insurance. While there may be some debate on whether that prerequisite works better than, say, no-fault insurance, no one doubts that the states have the authority to set the rules for the privilege of driving. And many people do not buy auto insurance because they have no need for it, since they do not drive.
Even if one bought the argument that everyone, or “just about” everyone, had to buy auto insurance, would that be a tax? Not if the government didn't compete in that market, or if the money went to government indirectly. If all of the money went to private businesses, it would not count as a tax, although it would be mighty foolish policy nonetheless. Of course, Obama plans on offering a government plan that does compete, which means that the mandate serves to force customers into buying plans. That puts money into the government's pockets both directly and indirectly.
However, that's not what Stephanopoulos and Obama were discussing. He specifically asked about the penalty for non-compliance – which in the Baucus plan is called, rather prosaically, an “excise tax”:
Excise Tax. The consequence for not maintaining insurance would be an excise tax. If a taxpayer‘s MAGI [gross income] is between 100-300 percent of FPL, the excise tax for failing to obtain coverage for an individual in a taxpayer unit (either as a taxpayer or an individual claimed as a dependent) is $750 per year. However, the maximum penalty for the taxpayer unit is $1,500. If a taxpayer‘s MAGI is above 300 percent of FPL the penalty for failing to obtain coverage for an individual in a taxpayer unit (either as a taxpayer or as an individual claimed as a dependent) is $950 year. However, the maximum penalty amount a family above 300 percent of FPL would pay is $3,800.
The agency that would enforce this provision? The IRS. Most Americans recognize that as the tax collection and enforcement agency of the federal government. And most would conclude that it's no stretch to conclude that a penalty that calls itself a tax and is enforced by the IRS is indeed a tax … except for the President who's under pressure to keep up appearances on a tax pledge he's already broken with the cigarette tax increase, and will have to break again and again for his ambitious domestic agenda.
Case in point: Obama's other signature domestic agenda item this year, the cap-and-trade plan. This plan forces energy producers and manufacturers to pay for licenses to emit carbon in the form of credits. That money goes directly to the federal government, which Obama plans to use for a wide range of “green energy” projects. That is undeniably a tax. Stephanopoulos read the Merriam-Webster definition in the interview, which fits this perfectly: “a charge, usually of money, imposed by authority on persons or property for public purposes.”
And who pays those taxes? Literally, the energy producers – but they sell their product to consumers. Those higher fees get passed to the consumer in the form of higher prices, and not just at the outlet, either.
Energy prices are multipliers in the distribution chain in that each step along that distribution requires purchased energy in one form or another, be it electricity, gasoline, diesel fuel, or natural gas. As the price of these energy sources increase, each entity on the distribution chain has to increase their price, which gives an energy price increase an exponential effect on the price of the end item. Americans saw this during the gas-price shock of 2007-8, as food prices shot upward along with the price at the pump.
How much will that impact consumers, as they pay the energy price increases for each stop on the distribution chain as well as that of their own personal use? The Treasury Department did an analysis of the issue, which the Obama administration attempted to hide until the Competitive Enterprise Institute won a FOIA fight and got the paper released. It projected that these costs could reach $1,761 per household, which would essentially reimburse energy producers for either the taxes they paid on the energy produced or the loss of business from production restrictions.
Since that money flows to the federal government, that's essentially a tax on American households, and a regressive one at that. President Obama can, and likely will, call it whatever he wants, but the money comes out of our pockets and into the coffers of the government. That's taxation, and middle-class families who voted for Obama based on his promise to keep them free of even a single dime of tax increases know the difference.
Edward Morrissey's Bio
Ed Morrissey writes for Hot Air, where he also has a daily political talk show. Ed has written for the Washington Post, the New York Post, the New York Sun, and has made numerous television and radio appearances. He lives in Minnesota with his wife, son, and two granddaughters.
Posted
09-24-2009 10:12 AM
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