Skip to main content
Part of complete coverage on
 

Tax or penalty, does it matter for Romney and Obama?

By Tammy Frisby, Special to CNN
updated 8:56 AM EDT, Fri July 6, 2012
STORY HIGHLIGHTS
  • Tammy Frisby: Republicans, Democrats argue if the individual mandate is a tax or penalty
  • Frisby: Debate over the tax status has little effect on who wins the White House
  • She says the health care law includes tax increases much higher than the mandate
  • Frisby: Conservatives have already won on the mandate issue, as indicated by polls

Editor's note: Tammy Frisby, a research fellow at the Hoover Institution, teaches politics and public policy at Stanford University.

(CNN) -- For the past week, the political fireworks surrounding the landmark decision by the Supreme Court to uphold the Affordable Care Act rivaled the excitement of Independence Day pyrotechnics.

President Obama is facing heavy criticism from Republicans that he has raised taxes on working- and middle-class Americans because the court upheld the individual mandate based on Congress' power to tax. The president and the Democrats are arguing that the mandate is not a tax but rather a penalty, since those who do not buy health insurance are paying a penalty in the form of a tax.

Meanwhile, on Monday a top adviser to Mitt Romney raised consternation among Republicans by saying that the individual mandate is not a tax, countering the prevailing conservative view.

Tammy Frisby
Tammy Frisby

Soon after, Romney himself made his much anticipated statement on the issue on TV, saying that since the Supreme Court has declared that the individual mandate is a tax, then it must be a tax.

Tax? Not a tax? What's going on?

The fact of the matter is this: As for who wins the White House, there is probably very little at stake for either Romney or President Obama in the debate over the tax status of the individual mandate.

Mandate a loophole for lobbyists?
Is health care mandate a tax... or not?

However the mandate is enforced -- as a tax or as a penalty -- it is a rounding error in the total tax increases in the Affordable Care Act.

The Congressional Budget Office estimates the individual mandate will raise $17 billion in revenue for the Treasury between 2015, when the first taxes or penalties would be collected under the provision, and 2019.

Aside from the individual mandate, the health care law includes numerous tax increases, for a total of more than $400 billion between 2010 and 2019, according to estimates by the Joint Committee on Taxation.

About half that amount, $210 billion over 10 years, comes from the increase in the Medicare payroll tax and a new Medicare tax on interest, rent and other investment income for individuals who earn more than $200,000 or families that earn $250,000 annually.

But other changes that raise Americans' tax bills include the reduction in the maximum annual contribution -- now capped at $2,500 -- to Health FSAs (your employer might call it your "cafeteria plan" to help pay for medical expenses). There is also an increase in the percent of your income that you must spend on medical expenses before those expenses are tax deductible, up to 10% from 7.5%. These two provisions taken together will raise taxes by about $28 billion over the law's first decade.

By 2019, the year when all the health care law's tax increases will be in effect, the taxes raised by the Affordable Care Act are estimated to be 0.49% of GDP. That is the 10th largest tax increase since 1950. In 2019, it will be the largest tax increase in the 26 years since Bill Clinton's 1993 tax increases.

Whether the $17 billion from the individual mandate is a tax is hardly necessary for the Republicans to argue that President Obama raised taxes. Nor does the mandate being a penalty clear the president's record on taxes.

The Obama administration and Democrats point out that the Congressional Budget Office has estimated the health care law will reduce total annual budget deficits between now and 2021. There is considerable controversy over the estimate of the effect of the health care law on deficits, but that aside, it will raise taxes -- and a lot of them.

Some Republicans insist that campaigning against the president on the individual mandate as a tax is still important. Because while most of the taxes are levied on employers, corporations and high-earners (including small businesses), the individual mandate is a direct tax on low- and middle-income Americans. If the mandate is a tax, they argue, the president has broken his pledge not to raise taxes on working- and middle-class Americans.

But, in the court of public opinion, conservatives have already won on the issue of the individual mandate.

Time and time again, when polled over the last two years, a majority of Americans have opposed the national requirement to buy health insurance. Looking at self-identified independent voters, those swing voters who decide elections, a March 2012 Kaiser Family Foundation survey found that only 32% supported a mandate with a "penalty" for noncompliance.

While the charge that "you raised taxes on hard-working Americans" is a good go-to move in American politics, it might not be possible for Republicans to gain more political advantage off the individual mandate than they already have.

So what will matter to voters on Election Day? How about principled arguments about what "good government" looks like and the proper balance between personal economic security and individual liberty? And what about a clear, concrete vision for returning prosperity to working- and middle-class America?

Those can be winning issues. For one of the candidates and for all Americans.

Follow us on Twitter @CNNOpinion

Join us on Facebook/CNNOpinion

The opinions expressed in this commentary are solely those of Tammy Frisby.

ADVERTISEMENT
Part of complete coverage on
updated 2:45 PM EDT, Thu April 17, 2014
Michael Bloomberg and Shannon Watts say Americans are ready for sensible gun laws, but politicians are cowed by the NRA. Everytown for Gun Safety will prove the NRA is not that powerful.
updated 9:28 AM EDT, Thu April 17, 2014
Ruben Navarrette says Steve Israel is right: Some Republicans encourage anti-Latino prejudice. But that kind of bias is not limited to the GOP.
updated 7:23 PM EDT, Wed April 16, 2014
Peggy Drexler counts the ways Phyllis Schlafly's argument that lower pay for women helps them nab a husband is ridiculous.
updated 12:42 PM EDT, Wed April 16, 2014
Rick McGahey says Rep. Paul Ryan is signaling his presidential ambitions by appealing to hard core Republican values
updated 11:39 AM EDT, Wed April 16, 2014
Paul Saffo says current Google Glasses are doomed to become eBay collectibles, but they are only the leading edge of a surge in wearable tech that will change our lives
updated 2:49 PM EDT, Tue April 15, 2014
Kathleen Blee says the KKK and white power or neo-Nazi groups give haters the purpose and urgency to use violence.
updated 7:56 AM EDT, Wed April 16, 2014
Sen. Sheldon Whitehouse and Rep. Henry Waxman say read deep, and you'll see the federal Keystone pipeline report spells out the pipeline is bad news
updated 7:53 AM EDT, Wed April 16, 2014
Frida Ghitis says President Obama needs to stop making empty threats against Russia and consider other options
updated 5:29 PM EDT, Tue April 15, 2014
Peter Bergen and David Sterman say the Kansas Jewish Center killings are part of a string of lethal violence in the U.S. that outstrips al Qaeda-influenced attacks. Why don't we pay more attention?
updated 12:41 PM EDT, Tue April 15, 2014
Danny Cevallos says families of the passengers on Malaysian Airlines Flight 370 need legal counsel
updated 11:23 AM EDT, Mon April 14, 2014
David Frum says Russia is on a rampage of mischief while Western leaders and Western alliances charged with keeping the peace hem and haw
updated 7:56 AM EDT, Mon April 14, 2014
Most adults make the mistakes of hitting the snooze button and of checking emails first thing in the morning, writes Mel Robbins
updated 1:54 PM EDT, Mon April 14, 2014
David Wheeler says as middle-class careers continue to disappear, we need a monthly cash payment to everyone
updated 7:55 AM EDT, Mon April 14, 2014
Democrats need to show more political spine when it comes to the issue of taxes.
updated 11:55 AM EDT, Mon April 14, 2014
Donna Brazile recalls the 50th Anniversary of the Civil Rights Act as four presidents honored the heroes of the movement and Lyndon Johnson, who signed the law
updated 9:17 AM EDT, Mon April 14, 2014
Elmer Smith remembers Chuck Stone, the legendary journalist from Philadelphia who was known as a thorn in the side of police and an advocate for the little guy
updated 2:56 PM EDT, Sun April 13, 2014
Al Franken says Comcast, the nation's largest cable provider, wants to acquire Time Warner Cable, the nation's second-largest cable provider. Should we be concerned?
updated 11:22 AM EDT, Fri April 11, 2014
Philip Cook and Kristin Goss says the Pennsylvania stabbing attack, which caused grave injury -- but not death, carries a lesson on guns for policymakers
updated 3:06 PM EDT, Fri April 11, 2014
Wikipedia lists 105 football movies, but all too many of them are forgettable, writes Mike Downey
updated 10:32 AM EDT, Fri April 11, 2014
John Sutter and hundreds of iReporters set out to run marathons after the bombings -- and learned a lot about the culture of running
updated 12:49 PM EDT, Fri April 11, 2014
Timothy Stanley says it was cowardly to withdraw the offer of an honorary degree to Ayaan Hirsi Ali. The university should have done its homework on her narrow views and not made the offer
updated 10:16 AM EDT, Fri April 11, 2014
Al Awlaki
Almost three years after his death in a 2011 CIA drone strike in Yemen, Anwar al-Awlaki continues to inspire violent jihadist extremists in the U.S, writes Peter Bergen
updated 9:21 PM EDT, Fri April 11, 2014
David Bianculli says Colbert is a smart, funny interviewer, but ditching his blowhard persona to take over the mainstream late-night role may cost him fans
updated 1:31 PM EDT, Thu April 10, 2014
Rep. Paul Ryan says the Republican budget places its trust in the people, not in Washington
updated 5:28 PM EDT, Thu April 10, 2014
Aaron David Miller says Obama isn't to blame for Kerry's lack of progress in resolving Mideast talks
updated 11:22 AM EDT, Mon April 14, 2014
David Weinberger says beyond focusing on the horrors of the attack a year ago, it's worth remembering the lessons it taught about strength, the dangers of idle speculation and Boston's solidarity
updated 12:32 PM EDT, Thu April 10, 2014
Katherine Newman says the motive for the school stabbing attack in Pennsylvania is not yet known, but research on such rampages turns up similarities in suspects and circumstances
updated 2:39 PM EDT, Wed April 9, 2014
Wendy Townsend says the Rattlesnake Roundup -- where thousands of pounds of snakes are killed and tormented -- is barbaric
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT