"Tax" dodge boomerangs on Obama in healthcare case

WASHINGTON Wed Mar 14, 2012 4:05pm EDT

U.S. President Barack Obama delivers a statement announcing new efforts to enforce U.S. trade rights with China, from the Rose Garden of the White House in Washington, March 13, 2012. REUTERS/Jason Reed

U.S. President Barack Obama delivers a statement announcing new efforts to enforce U.S. trade rights with China, from the Rose Garden of the White House in Washington, March 13, 2012.

Credit: Reuters/Jason Reed

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WASHINGTON (Reuters) - To be or not to be a tax?

That is the question in this month's U.S. Supreme Court case testing the validity of President Barack Obama's controversial healthcare system overhaul.

At issue is the money that Americans will have to pay starting in 2014 to the Internal Revenue Service if they fail to obtain medical insurance.

During his 2008 presidential campaign, Obama promised not to raise taxes on families earning less than $250,000. That's the same income bracket where a lot of people lack health insurance.

So, as president, Obama and his aides studiously avoided using the "t-word" as they worked to persuade Congress to pass the healthcare overhaul. Instead, they called it a "penalty."

Now enacted, the law itself refers to a "penalty" that must be paid if a taxpayer fails to get medical coverage.

Health and Human Services Secretary Kathleen Sebelius said at a recent congressional hearing that the payment "operates the same way a tax would operate, but it is not per se a tax."

Just last month, acting White House budget director Jeffrey Zients said in a hearing that it was not a tax.

Now, however, the White House needs to defend the healthcare law in court and things are different.

The Supreme Court starting on March 26 will begin hearing a case on whether Obama's healthcare overhaul is constitutional.

The administration is arguing the government can make people buy health insurance and charge them if they don't through its powers to regulate interstate commerce and to tax.

That argument raised some eyebrows and provided a "gotcha" moment for Republican lawmakers when administration lawyers argued in briefs filed before the Supreme Court that the minimum coverage requirement provision operated like a tax.

"The only consequences of failure to maintain minimum coverage are tax consequences," the administration lawyers argued in the briefs.

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Comments (16)
UnPartisan wrote:
I am well below 100k I am paying more taxes now than I was under GW Bush. The payroll tax credit has increased income so that I have to pay more taxes, and I am paying less in Social Security. The middle class, and more importantly the poor and unemployed have no idea that they are going to lose everything they own because they still wont carry health insurance, and the IRS is going to go after them.

Mar 14, 2012 4:14pm EDT  --  Report as abuse
2SLYFORU wrote:
UnPartisan –

If you happen to be bumped up into a higher income tax bracket because of that pee-wee extra $1000 a year you’re getting from the payroll tax cut then you need to pay closer attention to your tax withholding and your deductions.

If your income is on the boarder line of the next tax bracket I suggest looking into pre-tax deductions that will lower your tax liability. Even if you setup a traditional 401k and only put $1000 a year into it that will be enough to offset that ‘income increase’ that you’re getting from the tax break. 401Ks are 1 example but there are countless other deductions that can lower your tax liability.

Mar 14, 2012 4:45pm EDT  --  Report as abuse
Susanbsbi wrote:
Hey people if you pay for health insurance on your own, it is a 100% tax deduction on Schedule a, less 2% of your adjusted income. I feel that the penalty should not be applied to those who earn under 100,000 a year, as those making 250K a year can afford it and are not in the low or low middle class.

Mar 14, 2012 4:51pm EDT  --  Report as abuse
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