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Opinion

Health care's individual mandate is a tax and deserves to be part of the tax debate

The IRS collects the revenue and administers any penalties. How is that not a tax?

One of the more inventive ways the GOP fights the battle for cutting taxes has been to introduce the Obamacare individual mandate as part of the tax cut discussion.

Critics are bristling at the notion of including the individual mandate as part of a tax bill for two primary reasons.

First, they argue that "health care" and tax policy should be separated. "Republicans had their chance to repeal Obamacare and failed."

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Second, they argue that eliminating the individual mandate would "take health care away" from X amount of Americans.

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To the first objection, the excuse does not hold water. The individual mandate is a tax. Period.

The IRS collects the revenue and administers any penalties. The Affordable Care Act is the law today because Supreme Court Justice John Roberts said the individual mandate is a "tax" and not a "fee." Roberts' interpretation kept the Supreme Court from having to strike down the Affordable Care Act in its entirety.

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Whatever one thinks of Roberts' decision, the reality remains: The individual mandate is a tax on Americans (6.5 million of whom paid the fine in 2016).

As to the second objection, critics are relying heavily on estimates released by the Congressional Budget Office to claim that people would have their health care taken away. The claim is highly misleading for several reasons.

First, people who choose not to have a health care plan wouldn't "lose" health care. They'd decide not to purchase a plan. The choice would be up to them. A person cannot "lose" something they've chosen not to keep.

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Second, the CBO relied too heavily on the mandate as a reason people choose to buy health insurance. Writing in The Wall Street Journal, Chris Pope of The Manhattan Institute writes of the mandate:

As a newly released Manhattan Institute Issue Brief demonstrates, the mandate is superfluous to the ACA's core guarantee of affordable coverage for individuals with pre-existing conditions. In fact, it is subject to so many exemptions that recent studies have failed to discern any impact of the mandate on the proportion of Americans who are uninsured.

The study says the most significant impact on people obtaining health insurance correlates to the expansion of Medicaid and the generous subsidies for individuals who purchase their plans through the Obamacare exchange (the individual market).

The individual mandate is a tax and that tax hits middle-class taxpayers the most. Nearly 80 percent of those who paid the penalty made less than $50,000 per year. It operates as a mechanism to subsidize those with pre-existing conditions. Surely there can be a better way to see that people with such conditions are given a chance to purchase a plan that is affordable.

Finally, the CBO estimates rely on numbers that don't make much sense when given a closer look. For example, the CBO says that anywhere from 13 million to 15 million fewer people would have health care without a mandate. Of course, without any hard data to suggest the mandate is the reason people bought plans in the first place, it's hard to see how they arrive at such a conclusion.

The CBO said in one projection that 15 million fewer people would be insured in 2018 without the mandate. They suggest 6 million would drop out of the individual market, 6 million would drop their employer plans, and 3 million would drop Medicaid. As I said, there's nothing that shows what effect the mandate has on people's decisions to purchase plans, so it stands to reason it's perfectly acceptable to be skeptical of the CBO's predictions on those dropping their health care plans.

The CBO's track record on estimating those insured vs. those uninsured is spotty at best. But it remains a reliable source for crunching numbers. They determine that repealing the individual mandate would result in $338 billion over 10 years. That's serious money.

It's also why it should very much be any part of the GOP's tax plans.

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