President Barack Obama calls the individual mandate provision of his health care bill a "penalty." Mitt Romney calls it a "tax." The Supreme Court said it is constitutional under Congress' taxation power. But does the name used really matter?
The simple answer to the latter question is "no." Whether called a tax or a penalty, the fee paid to the IRS by anyone who does not have health insurance after 2014 will be assessed and collected in the same manner, the Supreme Court said.
But both the President and his Republican rival have begun a battle over semantics that has made the naming convention of this provision a linguist's dream and a layman's nightmare.
Simply put, both men are trying to use the term "tax" or "penalty" to support their stance on health care and make the other look bad politically. The Romney campaign wants to frame the fee as a broad-based tax that will cost the average American dearly. The Obama campaign wants to frame the fee as a penalty to be paid by the one percent of people driving up health care costs by not having insurance.
Therefore, the debate raging right now is simply one of general electioneering and not one of substance. To get a better idea of the most accurate portrayal of the fee, let us look at the Supreme Court ruling on the Affordable Care Act (ACA).
In the official ruling released June 28, Chief Justice Roberts concluded, "The individual mandate may be upheld as within Congress's power under the Taxing Clause."
This simply means Congress may require the payment of the fee under their overall power to pass and enact taxes. But does this mean the fee is actually a tax? On this, the ruling is less clear.
Roberts argued in his opinion that the fee can be included under Congress' taxing authority because it looks like a tax in many ways, including its manner of collection (paid in one's annual tax payment to the IRS). Roberts also said using the word "penalty" usually denotes a criminal act could be committed, whereas not paying the individual mandate fee would not be considered a felony. Therefore, the fee could be considered a tax.
But here is where detail matters. Roberts continually says the characterization of the fee matters, but only when one is making the argument for its constitutionality, not for its overall functionality. In fact, he repeatedly uses the words "can," "could" and "may" to describe how the fee might be characterized, making it clear the fee could - but does need not be - considered a tax.
"The Affordable Care Act's requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax," Roberts wrote in his opinion.
Roberts goes onto note, "Section 5000A(g)(1) specifies that the penalty for not complying with the mandate 'shall be assessed and collected in the same manner as an assessable penalty'...[which], in turn, 'shall be assessed and collected in the same manner as taxes.'"
Therefore, the penalty and tax in this case are one and the same in their assessment and collection, Roberts shows. Therefore naming convention, while important politically, means nothing substantially.
Until Monday, both Mitt Romney and his senior campaign advisor Eric Fehrnstrom continually characterized the fee as a penalty. But after the president's re-election campaign began to characterize the fee as a penalty, and not a broad-based tax, the Republican establishment quickly back-tracked.
"Our position is the same as Mitt Romney's position. It's a tax," Republican National Committee (RNC) Chairman Reince Priebus said Monday. A short time later, Romney changed his own characterization.
"The Supreme Court has spoken and while I agreed with the dissent, that's taken over by the fact that the majority of the court said that it's a tax and therefore it is a tax," Romney said Wednesday in an appearance on CBS.
The Obama campaign hasn't stopped fanning the semantics flame either, coming out multiple times this week in opposition to the individual mandate provision being called a tax. At various times this week, the campaign has said the Supreme Court agrees with their "penalty" characterization.
"As a matter of policy, it is simply a fallacy to say that this is a broad-based tax. That's not what the opinion stated that was authored by the Chief Justice," White House spokesman Jay Carney told reporters Thursday. "The Affordable Care Act is constitutional under Congress's taxing authority, but this is clearly a penalty that affects less than 1 percent of the American population."
"[The health care situation in America is] really the question we should be dealing with now, not this silly debate," new traveling campaign Press Secretary Jen Psaki said in the same briefing, adding that Romney's own Massachusetts health care law also included such a fee, which the former governor then called a "penalty."
"It's clear that he is being impacted by the push from the right, the Rush Limbaughs of the world, congressional Republicans, who are pushing him to go back on a decision and a defense that he's had in place for years," Psaki added.
Pundits have also jumped on the naming debacle, saying the manner in which the fee is referred does not matter in the larger scheme. Some bloggers have even started coining new terms, such as "penaltax" and "taxalty" to make light of the debate.
But however the fee ends up being characterized, substantially, it does not matter and the Supreme Court ruling was not passing judgment on its efficacy.
"Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness," the Chief Justice wrote in his ruling.
by RTT Staff Writer
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