A health care tax

Opinion: September 14, 2010 at 12:00a.m.

By Burke A. CHRISTENSEN

McClatchy-Tribune

RICHMOND, Ky.

The Obama health-care law requires Americans to buy health insurance starting in 2014 or pay a penalty. The penalty is the higher of a fine of $695 or 2.5 percent of your income. If your income is $50,000 and you don’t buy the required “minimum essential coverage,” your 2014 income tax bill will increase by $1,250. This is not small potatoes. The Congressional Budget Office has estimated that the new law will take $4 billion from American taxpayer’s pockets in 2017.

You are exempt from the penalty if your income is below the IRS filing limit or if the cost of health insurance would be more than 8 percent of your annual income.

Despite the fact that the penalty will be paid to the government and reported to the IRS on your income tax return, President Obama has said that he “absolutely rejects” the notion that the penalty is a tax.

President’s pledge

Perhaps this is because the president has also said that under his health-care 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.”

That was then, this is now.

Is it constitutional to mandate that Americans must purchase health-care insurance from private companies or pay up to the IRS? The Constitution gives the administration two sources of power to defend this law. The first is the power to regulate interstate commerce and the second is the power to lay and collect taxes.

The Interstate Commerce Clause regulates interstate economic activity that crosses state lines. But the failure to buy health insurance is intrastate economic inactivity.

The Constitution was drafted to limit the power of government. Why should the Interstate Commerce Clause regulate a person’s decision not to engage in interstate commerce? To support the Obama administration’s argument that inactivity can still actively affect interstate commerce, it may not surprise you to learn that the administration cites a nearly 70-year-old case, Wickard v. Filburn.

In that case, Ohio farmer Roscoe Filburn was penalized because the Supreme Court decided he had engaged in interstate commerce when he grew a small amount of wheat purely for his own use but in excess of his federally imposed production quota. The government argued that even though Roscoe’s entirely in-state production was trivial, lots of Roscoe Filburns, each one locally growing a little bit of wheat for his own use, was bad for the government.

Taxing power

What about the taxing power? Forget the president’s claim that the mandate is not a tax. He is now defending the mandate in court as a valid exercise of the power to impose taxes and President Obama will probably win because the taxing power is even broader than the commerce clause. But should he?

The president may be taking both sides of the “Is it a tax?” debate because his mandate has no teeth. The law does not permit the IRS to bring a criminal prosecution against anyone who violates the law but does not pay the penalty. Perhaps that is what the president meant when he said that under his plan your taxes will not increase.

Politicians who continue expanding the size of government should at least be honest about who is going to pay for it. You are.

Burke A. Christensen is an expert in health insurance law and holds the Robert B. Morgan Chair of Insurance Studies at Eastern Kentucky University.