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As 2015 comes to a close, we're taking a look back at...
- The Tax Policy Blog
- Is the Health Care Individual Mandate a Tax?
Is the Health Care Individual Mandate a Tax?
Under the health care reform package under consideration, all Americans will be required to purchase health insurance or pay an amount from $750 to $950 to the government. ABC's George Stephanopoulos asked President Obama in an interview whether that charge is a tax, to which the President responded:
"For us to say you have to take responsibility to get health insurance is absolutely not a tax increase," Obama said on ABC's This Week on Sept. 20. George Stephanopoulos responded by whipping out a copy of Merriam-Webster's dictionary and reading aloud the definition of tax. Obama stood his ground: "Nobody considers that a tax increase."
The White House's argument, reinforced by a talking points memo they released today, is that because health care reform will reduce a whole bunch of costs on society, and because these reduced costs exceed any increased revenue from the fines, it's not a "tax increase."
Even assuming for the sake of argument that the health care bill will reduce costs, that is irrelevant to the question of whether it is a tax or not. Just because the benefits of a government service exceed the costs of not having it doesn't mean the revenue used to create it is not a tax. I'd think that having a judicial system is more beneficial than not having one and saving the taxes used to pay for it, but that doesn't mean those aren't taxes.
A tax's purpose is to raise revenue; a fee's purpose is to cover the cost of providing a service exclusive to the payor. A fine, which has the purpose of penalizing behavior, is more tax-like than fee-like but perhaps is its own category. But the ultimate question in defining taxes and fees is what the revenue goes for, not whether the tax produces benefits in excess of its costs, and certainly not what an interested party happens to label it.
More on taxes and fees in our Weisblat brief.
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The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.