While Presidential hopeful Mitt Romney’s team scurries to deal with the fall out from his “entitlements” speech, President Barack Obama’s team is having their own “not how I’d hoped this would go” moment. The Obama campaign was dealt a serious blow on yesterday when the nonpartisan Congressional Budget Office (CBO) released a report indicating that nearly 6 million Americans will be subject to a tax penalty under the Affordable Care Act (sometimes called the health care act). That number is significantly higher than previously touted and will certainly become ammo for those who already opposed to the plan.
Here’s what everyone is talking about: beginning in 2014, the new law requires U.S. residents to either get health care insurance or pay a penalty tax (of course, whether it’s actually a penalty or a tax is subject to debate). The amount of the penalty tax is the larger of a flat dollar amount or a percentage of household income. In terms of dollars, by 2016, the CBO estimates that the average penalty tax will be $1,200.
Ouch.
And who pays? The CBO says that the overwhelming majority (80%) of those at risk of being subject to the penalty tax are those in the middle class with incomes between $55,850 and $115,250. The same middle class who already feels under attack.
Even more damaging to the President – in the wake of those “entitlement” claims – unauthorized immigrants are exempt from the requirement to get coverage or pay the price. Other low-income residents are also exempt. Together, those folks make up about half of the 30 million non-elderly residents who will be exempt from the requirement. The remaining exemptions will be issued because of hardships or religious beliefs. Those who fail to get coverage and do not qualify for an exemption will have to pay the penalty tax which will be collected by the IRS (at least in theory since the bill has no collection “teeth” – but that’s a whole other story).
So what gives? Why the higher numbers of those actually affected by the law? The big factor is the economy. More folks have less money – and fewer benefits. It’s simple math. Additionally, some folks will be affected by the recent Supreme Court decision which allows states to opt-out expanding Medicaid funding (though they will be forced to continue any existing plans with existing funding); the result of that part of the decision is more uninsured residents.
The stats aren’t favorable to the President but a little context is warranted. The increase of more than two million taxpayers – while a huge number to those affected – is statistically insignificant. It works out to less than 1% of the population, making them, I guess, the other 1%.
But it’s still not going to play well in an election year. Romney has already declared the health care law a “disaster” and has, as a campaign promise to “Repeal and Replace Obamacare.”
