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The New Middle Class Tax

September 8, 2009, 8:12 pm

From Joe Biden, in the debates:

"No one making less than $250,000 under Barack Obama's plan will see one single penny of their tax raised, whether it's their capital gains tax, their income tax, investment tax, any tax."

Oops:

Under the plan, people who earn between 100% and 300% of the poverty level (or between about $22,000 a year and $66,000 a year for a family of four) would face fees ranging from $750 to $1,500 a year.

For taxpayers with incomes above 300% of poverty, the penalty starts at $950 a year and reaches as high as $3,800 for families. Nearly 12 million people fit in this category, according to the National Institute for Health Care Management.

The idea behind the penalty is that those who can afford insurance but don't buy it are imposing costs on the entire health system. Under the proposal, nearly 12 million people who currently have no insurance could be subject to such fines, according to figures compiled by the National Institute for Health Care Management.

People focus too much on the penalty itself being a new tax.  But the new tax is actually the requirement that individuals buy a product (in this case a health insurance policy) that they feel has no value (or else they would purchase it of their own free will today).  The government stopped pretending long ago that these younger middle class families will get much value from such a policy.  In fact, if they did get value commensurate with the premiums they will be paying, the mandate would not be achieving its purpose.  The whole point is that healthy people pay more into the insurnace system than they get back to support sick people.  If that payment is mandatory, then it is a tax, even if it is called an "insurance mandate" instead.

In fact, this is made all the more clear when politicians also suggest that cheaper high deductible health insurance plans be banned, as they were in Massachusetts.  Again, the whole point is to get young healthy people to overpay for insurance, and allowing them to buy sensible, cheaper, high deductible insurance defeats the whole purpose.

This is a tax on middle America, and Obama knew he was going to propose it way back in the campaign.  This is not something he just thought up or was a victim of changing circumstance.  This is an out and out lie on his part.


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  • Michael

    It would be nice if a word to replace insurance could be used to describe what is going on in the heath payment system. Health insurance could then be use to describe covering significant illness or injury and the other terminology would be used to describe pooling the costs of covering the mundane health care costs people face everyday.

  • Mark

    How is it possible to assume someone without insurance is " imposing costs on the entire health system". If you do not have insurance but can afford it you cannot get an medical cost without paying for it. IF you cannot affort the coverage you will simply forgo it.

  • Curt

    You simply cannot have any type of guarantee of universal coverage, or even coverage with pre-existing conditions at any kind of reasonable price, without a corresponding mandate. Otherwise, you would have an almost immediate collapse of the insurance system, public or private, as healthy people increasingly forego coverage, knowing they could start purchasing it when and if they get sick. Now we are starting to get the details of what this mandate would entail. It will be very interesting to see how this flies as this becomes more widely known.

  • ArtD0dger

    People with pre-existing conditions do not need health insurance, they need health care. Society -- perhaps even the state -- may have some duty in this, but the fiction that it is "insurance" only serves to screw up the market price-signaling mechanism.

    Rawls' "veil of ignorance" makes a fine thought experiment, but attempting to apply it in actual practice in order to void revealed information necessitates compulsion, rather than liberty, in individual action. Leftists know this.

  • http://togetrichisglorious.blogspot.com Colin

    It also seems that Obama is open to the soda tax, which I'm guessing wouldn't be restricted to those making at least $250K.

    http://www.nydailynews.com/news/politics/2009/09/08/2009-09-08_president_obama_says_sin_tax_on_sodas_is_food_for_thought.html

  • http://www.linesinthesand.net Doug

    To the extent insurance premiums are based on actual risk, the presence or absence of either young, healthy people, or of low deductibles has no effect on the net cost. When premiums are not allowed to reflect risk, the result is simply cost shifting.

    Curious how cost shifting is considered despicable when healthcare providers do it but somehow becomes noble when government requires insurers to do it.

  • delurking

    One thing that happens all the time is that young couples go without insurance until the day they decided to have a child. Then they buy insurance knowing that the premiums will be less than the medical costs associated with pregnancy (more precisely: it will be many years before their premiums add up to the total pregnancy costs). Those people are imposing costs on others unfairly.

    Insurance is really a noble concept: people in a community each put money into a pot, and if someone suffers misfortune they are reimbursed from the pot. Following this philosophy, insurance should not cover costs associated with a normal pregnancy. However, now that it has been covering such costs for so long, taking back the coverage will be basically impossible.

    Also following this philosophy, Coyote's argument about "forcing young healthy people to overpay" to a large extent does not apply. The whole point of insurance is that a lot of people will pay in premiums more than they receive in benefits. If everyone pays in premiums what they receive in benefits, then it isn't insurance any more.

  • Reformed Republican

    "It would be nice if a word to replace insurance could be used to describe what is going on in the heath payment system. "

    Extended warranty? Service plan?

  • Oscar

    Actually, if the health care reform bill was composed solely of this mandate, and if it had a sunset clause, I would support it. It would be a net good for society, especially the young and the middle class.

    Obama was elected in part through the activism and votes of young, college-aged students. Imagine their surprise when they find out that they have to shell out an extra $1000 per year to fund ObamaCare (that's on top of their subsidizing MediCare, of course). It would show them that stupidity has its price.

    As for the middle class, it might do serve as a reminder that, once in power, Democrats WILL raise taxes. No matter what they say, no matter what they promise, Democrats WILL raise taxes. Bank on it.

    If those two groups learn their lesson, maybe we can elect actual adults to positions of responsibility next time around.

  • perlhaqr

    Oscar++

    It might be worth being dinged a couple thousand, even, if it hit those likely to vote Democrat that much harder.