“Here’s the concern. If you haven’t made it affordable, how are you going to enforce a mandate. If a mandate was a solution, we could try that to solve homelessness by mandating everybody buy a house. The reason they don’t have a house is that they don’t have the money.” – Barack Obama in 2008.
President Obama was correct then (though he would later go on to flip-flop on his position) just as Republicans are correct now in their attempts to do away with the individual mandate. Republicans’ effort to repeal the individual mandate has become a flashpoint in the tax reform debate after the Senate bill included it in an effort to save another $318 billion that could be repurposed to tax reductions for the middle class. The savings come from individuals who will make the choice to stop purchasing Obamacare plans once freed from the shackles of the mandate, which leads to reductions in the amount of Obamacare subsidies the federal government will need to pay out.
Democrats saw the inclusion of the repeal as an opportunity to sink tax reform.
“We’re kicking 13 million people off of health insurance to give tax cuts to the wealthy,” Democrat Senate Minority Leader Charles Schumer said in a tweet that was representative of the argument coming from his caucus.
The 13 million figure that Democrats are touting comes from a Congressional Budget Office estimate on the impact of repealing the mandate. The problem is that the number is about all that Democrats get right. As Thomas A. Barthold, chief of staff on the Joint Committee on Taxation, said when asked about the “kicked off” language: “The result in terms of changes in the uninsured is a result of decisions made. There’s nothing that mandates people give up insurance. It’s an economic decision.”
Bingo. Expanding insurance coverage is a laudable goal, but forcing people to purchase something they may not need, or may not be able to afford at the risk of a sizable tax penalty, is not in any way laudable. In fact, as Chris Pope argued in The Wall Street Journal, it would be hard to think of a worse way to expand coverage:
“If you were deliberately trying to design the most arbitrary, painful and pointless tax possible, how would you go about it? First, you would structure it to inflate the cost of an essential product. Then, you’d create exemptions so vast that only 5% of taxpayers were subject to it. You might even ensure that it hit people only when they were particularly vulnerable – like when they’d lost a job. Finally, you would use it to drive enrollment in entitlements, so that it increased the federal deficit by $338 billion. In short, you would design something that looks very much like the Affordable Care Act’s individual mandate.”
Perhaps worst of all, the mandate is acting as a regressive tax on Americans who simply can’t afford insurance.
“The individual mandate isn’t just any tax, it’s a terribly regressive tax that imposes harsh burdens on low- and middle-income taxpayers,” Sen. Orrin Hatch argued on the Senate floor. “According to the IRS, roughly 80 percent of Americans who paid the individual mandate tax in 2015 made less than $50,000 a year. Zeroing out the mandate will raise $318 billion over 10 years, money we use in our mark to actually lower taxes for the middle class.”
That’s a win-win. Poorer Americans—many of whom are young, healthy entrants to the workforce—will no longer be dragooned into buying something they don’t need. And many of those same Americans will reap the benefits of tax reductions that they can use to address pressing needs, including health coverage.
In an ideal world this repeal could be paired with broader relief from Obamacare’s insurance regulations and other health insurance reforms so that the market could respond to American’s newfound flexibility with insurance plans tailored to individual need. That would allow us to fulfill President Obama’s original promise of not forcing Americans to buy health insurance, but to instead make it affordable enough that people want to buy.
But in the meantime, tax reform at least offers us the opportunity to provide Americans some tax relief, while at the same time setting the table for holistic health care reform.
Photo credit: Gage Skidmore.