WASHINGTON, D.C. (YBH.ME) – Even after the testimony presented by Steven T. Miller (IRS Deputy Commissioner for Services and Enforcement) during a hearing of the Senate Finance Committee, questions surrounding President Obama’s health insurance mandate — specifically, how the mandate will be enforced — continue to swirl.
During his April 15th testimony, Miller could only confirm what everyone already knew, that, starting in 2014, Americans will be penalized for failure to purchase health insurance. By 2016, the penalty will be either $695 per year, or 2.5% of the non-insured’s household income, whichever is greater.
Miller also confirmed that it will be the job of the IRS to enforce the mandate. However, the law (as it is presently written) explicitly prevents the IRS from bringing criminal charges against a person who refuses to purchase insurance. The IRS is also prohibited from imposing liens or levies.
Which begs the rather obvious question: how will the mandate be enforced? Without a means of collecting the penalties, the mandate would be, essentially, toothless.
The only specific option that Miller was able to suggest to the committee was that the IRS could withhold the penalty amount from the uninsured’s tax refund. Which is all well and good unless the offender is one of the roughly (on average) 26.5% of Americans each year who don’t qualify for a refund.
That there’s confusion about how the penalty would be collected is hardly surprising, considering that there’s not even agreement about what to call it. The AP, CNBC, Newsweek, and the Washington Post use the term “fine.” CNN, Fox News, and the Christian Science Monitor call it a “tax.” Other media outlets just stick to calling it a “penalty,” without being any more specific.
To help sort through these issues, I consulted with Brooks Jackson, President of the non-partisan FactCheck.org, a project of the Annenberg Public Policy Center of the University of Pennsylvania. Jackson is the go-to guy for anyone looking for a fair and even-handed perspective on important issues in an increasingly contentious, partisan, and confusing political environment.
In this YBH! exclusive, Mr. Jackson addressed the confusion surrounding the insurance mandate penalty.
On the issue of what to call the penalty, Jackson had this to say: “The law calls it a ‘penalty,’ but it’s part of the Internal Revenue Code, and legally it’s a tax. But of course, it’s both. The Kaiser Family Foundations’ summary even calls it a ‘tax penalty’ for example. It is not legally a ‘fine.’
“The significance here is that the IRS can collect a tax, but anything that is legally a fine would have to be collected through the courts, using civil legal procedures. I suspect that the authors of the legislation were also thinking that since the Constitution gives Congress clear authority to levy taxes, it would be easier to defend the personal mandate against legal challenges if the penalty was structured as a tax rather than a civil fine. As you know, lawsuits already have been filed seeking to overturn the law based on the claim that Congress lacks authority to require individuals to purchase a specific type of product.”
Regarding collection of the “penalty tax,” even Mr. Jackson can’t provide anything but guesses: “I don’t blame people for being confused about how this can be enforced, given that Congress has waived criminal penalties for tax evasion and also some of the more powerful collection methods the IRS normally uses to collect delinquent taxes. One method that is still available would be to simply withhold any tax refunds that are owed, or to cut off any Earned Income Tax Credits that might otherwise be available to low- and middle-income workers. Those could be quite effective, I imagine. But we’ll have to wait and see how this works out in practice. I suspect this will be like seat-belt laws. People grumbled at first, but now most people buckle up even though cops don’t write many tickets. The fact is, you can legislate morality — or at least, cultural practices — to a greater degree than we often realize.”
Mr. Jackson’s closing comments are truly insightful. Right now, people are indeed “grumbling” about the mandate (it remains one of the most unpopular aspects of President Obama’s health insurance reform bill), but — as with Mr. Jackson’s aforementioned seat-belt laws – Americans might eventually become so at-ease with the concept that Congress may, at some point in advance of 2014, amend the law to give the IRS more power to collect the “tax penalty.”
Depending on where you stand regarding the insurance mandate, that is either a prospect to be hoped for, or to be feared.
