"Tax" dodge boomerangs on Obama in healthcare case

WASHINGTON Wed Mar 14, 2012 8:30pm 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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