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.