top of page

Individual Mandate Repeal Is a Middle Class Tax Cut

By Ryan Ellis

The Senate Finance Committee announced today that it would add to the Senate tax reform bill a zeroing out of Obamacare’s individual mandate surtax, in essence repealing the mandate. This is a big tax cut aimed squarely at America’s middle class.

The mandate is a tax which punishes those who can least afford it

Obamacare’s individual mandate is enforced by the collection of a surtax on income. Failure to purchase Obamacare insurance triggers the surtax.

In 2017, the surtax is equal to the greater of:

  • 2.5 percent of adjusted gross income, or

  • the dollar penalty

The dollar penalty is $695 for every adult in the household, plus $347.50 for every child in the household, with a household maximum of $2085.

Do the math, and that means that for any family making more than $83,400 the mandate tax is a flat 2.5 percent of income. For a single person, it’s $27,800. For a single Mom with two kids, it’s $41,700.

The mandate tax hits the working and middle class the hardest

According to the IRS, some 6.7 million American families pay Obamacare’s individual mandate surtax, forking over $3 billion annually to Uncle Sam merely for exercising their right not to purchase an unaffordable Obamacare plan. It turns out most of these taxpayers are solidly in the middle class. See the chart below:

All Incomes <$50,000 <$200,000

Number of Mandate Taxpayers 6.67 million 5.3 million 6.6 million

Average Tax Paid $450 $340 $455

Total Tax Paid $3 billion $1.8 billion $3 billion

As you can see, the overwhelming number of taxpayers who face this Obamacare individual mandate surtax make less than $200,000 per year. The great majority of them (80 percent) actually make less than $50,000 per year. This is perhaps the most regressive tax we have on the books today.

Senator Steve Daines (R-Mont.) has a great chart breaking this down by state and by income group.

To pick four totally random states–Maine, Alaska, Kentucky, and Wisconsin–let’s see how the tax is paid across the country.

Maine Alaska Kentucky Wisconsin

Total Mandate Taxpayers  34,030  19,970  79,260 105,040

Total Tax Paid  $15.5 million  $12.8 million  $31.3 million $42.1 million

Average Tax Paid  $455  $641  $395 $401

<$50,000 Taxpayers  27,000  12,710  65,650 86,270

Percent Making <$50,000 79.3% 63.7% 82.8% 82.1%

The mandate tax is unpopular

According to a December 2016 Kaiser Health Tracking poll, the individual mandate is deeply unpopular:

  • only 35 percent of Americans favor the individual mandate

  • only 21 percent of Republicans and 30 percent of independents have a favorable view

  • fully 43 percent of Democrats don’t have a favorable view of the individual mandate

The mandate is a tax

Democrats are trying to say that zeroing out the individual mandate surtax is a healthcare action, and not a tax. That’s ridiculous for several reasons:

  • The Supreme Court has ruled that the surtax is a tax, and used this as its justification to uphold the Obamacare law

  • The surtax is reported on the 1040 tax form

  • The surtax is paid and enforced by the IRS

  • If you don’t pay the surtax, the IRS can charge you interest and pursue penalties against you

  • The surtax is written into Title 26 of the U.S. Code, otherwise known as the Internal Revenue Code

  • The surtax revenue is reported in the IRS Statistics of Income reports

  • The surtax is scored as a tax by the Joint Committee on Taxation

If that’s not a tax, I’m not sure what is.

Ending the individual mandate surtax will not cause anyone to lose their health insurance. It will merely stop punishing people who choose not to buy expensive insurance with a surtax they cannot afford, either.

Even candidate Barack Obama hated the individual mandate and its surtax

Learn more here.

1 view0 comments


bottom of page