Mandate or Tax? Grassley v. Baucus

Sep 22, 2009 5:48pm

My exchange with President Obama on Sunday sparked another one today in the Senate Finance Committee:

 

Grassley: It gets back to something that President Obama was speaking about on the Sunday talk shows, trying to say that it’s not true that the penalty for not getting insurance is a tax, referring to the individual mandate.

The mark before us makes it pretty clear that the penalty is a tax, it looks like the tax is now up to about $2,000 dollars a year, so Mr. Barthold, isn’t the penalty here an excise tax and won't it affect people making under $250,000 dollars a year?

Barthold: Senator Grassley, the penalty proposed in the Chairman’s mark, is as you observed, it's structured as a penalty excise tax, we have other penalty excise taxes in the internal revenue code. We have not separately analyzed – we’ve worked in conjunction with Mr. Elmendorf and his colleagues at the Congressional Budget Office, in terms of the overall effects of what sort of people might purchase insurance through the exchange, who would not have insurance provided by their employer, and where the individual mandate or the employer free rider penalty would arise.

We have not done a combined distribution analyses across income to specifically answer your question but to the extent that yes we think that some people would be subject to the penalty excise tax when everything shakes out we would expect that some would have incomes less than $200,000 dollars.

Baucus: Let me just say on that point, that’s an interesting question. This is really a penalty that’s being collected by the Internal Revenue Service, it could be collected by another body, another entity, another agency perhaps HHS. HHS could set up a whole other apparatus, maybe the HELP bill has something similar I don’t know, and that leads to all kinds of complications, they don’t have the data, they're not as efficient.

But somebody’s going to have to collect the penalty to the degree that the penalty is paid. In the modification, too, we’ve reduced the penalty significantly, we’ve cut it in half, so it’s much smaller than it otherwise was. 

But somebody’s going to have to collect it to the degree that there is one, and that it is committed to determination, or at least it’s my determination so far, that the better, more efficient is through the IRS which is set up to collect these kinds of penalties, so it’s really a penalty that we’re talking about here just the IRS it's not HHS is collecting the penalty.

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