Yes, an insurance mandate is a tax

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Will

Will writes from Washington, D.C. (well, Arlington, Virginia). You can reach him at willblogcorrespondence at gmail dot com.

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39 Responses

  1. Nob Akimoto Nob Akimoto
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    says:

    *Gasp!* A Cato Institute scholar citing a Cato Institute paper that PROVES WITHOUT A DOUBT that a mandate is a TAX! My eyes have been opened!

    …okay but really, how does government requiring a risk pool be created from its entire citizenry to reduce the pooling problems inherit in something like health insurance amount to a tax? It’s an intervention for sure, but the comparisons Kuznicki draws are rather specious red herrings.Report

    • Avatar Will in reply to Nob Akimoto
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      By definition, a regulation that forces people to pay money for something is the functional equivalent of a tax. Whether or not that’s justified is another question entirely, but let’s at least be clear about the terms of the debate.Report

      • Nob Akimoto Nob Akimoto in reply to Will
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        This would be fine if anti-tax crusaders hadn’t gone to such extreme lengths to define taxation as some sort of theft. It’s the same people who do this extreme “all taxes are theft” posturing that are demanding that we call mandates a tax. Understandably there is some dislike of going along with definitions when the terms of the debate have been so thoroughly coopted in the public debate.Report

    • Avatar Jaybird in reply to Nob Akimoto
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      It’s not a tax at all. It’s just money that you earned that the government is forcing you to give to another institution that paid for the lobbyists that wrote the laws in the first place.

      It’s not like you’ll go to jail if you break the laws like if you cheated on your taxes.Report

  2. Avatar Jason Kuznicki
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    says:

    Honestly, I hadn’t intended to prove much of anything by citing my colleague, other than to quantify the obligation. Call it what you will, tax or not, but let’s at least assign the correct dollar values to it, which I believe the soon-to-appear report has done.

    And, if you don’t like Cato Institute scholars, perhaps the Clinton-era Congressional Budget Office would be more to your liking? They were quite content to call an individual mandate a tax back in the day. It wasn’t even an issue; this was a tax, they said, and everyone agreed.

    Now, however, and thanks to some fairly arcane distinctions, the mandate before Congress doesn’t get counted as a tax. You still have to pay it, however, and you still pay penalties for not paying it. And, lurking in the background, there’s still prison time for the hard-core evaders. If it looks like a duck…

    But anyway. If the word “tax” — on the lips of those nasty libertarians — just sounds wrong to you, then consider “neo-feudalism,” which, though coined by a lefty, seems relatively apt as well. If so, things are worse, not better, than I suggested.Report

    • Nob Akimoto Nob Akimoto in reply to Jason Kuznicki
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      says:

      Snark aside. (To which I apologize, it was unnecessary)

      If you are willing to place mandates on the level of taxation or even Wheeler’s absurd “neo-feudalism” crap, then where do MLR limits and guaranteed issue, price spread caps and other tools included to place more restrictions on insurer behavior fall in? Are these too taxes? Is every form of regulation or adjustment for market failure that has an expenditure a tax?Report

      • Avatar Jason Kuznicki in reply to Nob Akimoto
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        says:

        If you are willing to place mandates on the level of taxation or even Wheeler’s absurd “neo-feudalism”… then where do MLR limits and guaranteed issue, price spread caps and other tools included to place more restrictions on insurer behavior fall in?

        Those are simply instances of “he who pays the piper, calls the tune.”Report

  3. Avatar Scott
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    says:

    Why not call it an unfunded government mandated expense?Report

  4. Avatar David
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    says:

    It’s a sad statement that the leading political figures in our nation spend so much time being wrong that whenever opposing politicians agree with each other they are almost always wrong together rather than right together.Report

  5. Avatar Silus Grok
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    says:

    You tax _something_ — there are income taxes, sales taxes, inheritance taxes, cigarette taxes. At best, this is a fee. But CATO just wants to conjure up the spectre of taxation. You use a word enough out of context and it’s meaningless. If you want to go this far, just about EVERYTHING is a tax. Car insurance? It’s a tax. Not being able to steal stuff you want. A tax. Not being able to pollute. It’s a tax. Hell, just writing this response is pretty damn taxing.Report

    • Avatar Jaybird in reply to Silus Grok
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      says:

      People should be glad we let them keep as much money as we do.Report

      • Avatar greginak in reply to Jaybird
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        says:

        damn people for wanting roads and cops and health care. we should just have bake sales to run the gov. damn people for not copying all those other successful systems of running a country that don’t use taxes.Report

        • Avatar Will in reply to greginak
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          says:

          Guys, seriously: NO ONE is denying the legitimacy of taxation under certain circumstances. The point is that our political terminology should actually explain what stuff does instead of deliberately obscuring real costs to make some reform seem more palatable.Report

          • Avatar Silus Grok in reply to Will
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            says:

            Actually, I think you have it a little backwards: what CATO is doing is obfuscating. We’re using the correct terminology, here. Requiring citizens to purchase insurance — whether its flood, car, or health insurance — is categorically NOT the same as taxing them (and then, presumably, providing the service as some socialized program). The results of those two approaches are DIFFERENT.Report

            • Avatar Jason Kuznicki in reply to Silus Grok
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              says:

              Requiring citizens to purchase insurance — whether its flood, car, or health insurance — is categorically NOT the same as taxing them (and then, presumably, providing the service as some socialized program).

              As I suggested above, if anything, this is worse than a tax. It is a forced cash transfer to short list of corporations. Call it corporate tithing.

              Really, if Cato were to propose such a scheme, you’d say that it’s just our sort of thing. Aren’t we corporate shills, after all?

              But every Cato scholar I’ve read is firmly, solidly, adamantly against it, and I do hope that that might change your opinion a bit. Favoring the free market is not the same as favoring whatever corporation happens to be successful. Rightly understood, these things are typically opposed to one another.

              Sadly, “rightly understood” comes all too rarely in most public policy debates, but this is one of those times. There are more and less deserving recipients of forced cash transfers, and corporations — who should be making money consensually, or not at all — are among the least worthy.Report

        • Avatar Jaybird in reply to greginak
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          says:

          If we’re lucky, we can watch health care be shot down in the Senate (again) and have a discussion about how those people who want us to not have health care can just move to Somalia.Report

      • Avatar Freddie in reply to Jaybird
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        says:

        People earn the money they do because of a truly innumerable amount of contributions from the civil society and governmental infrastructure around them, so the society and government have every right to take what they are owed in the transaction, as much as any investor ever.Report

  6. Avatar Freddie
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    says:

    The government requires me to wear pants. If I walk around without pants, I will be arrested. Are pants a tax?Report

    • Avatar Will in reply to Freddie
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      If going pants-less is the norm, sure.Report

      • Avatar Freddie in reply to Will
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        says:

        You’re playing with your own framing of the issue. Again, the government forces me to wear pants; I have no choice in the matter. I further have to pay for pants all on my own. I ask you, by your own criteria: is the requirement to wear pants a form of a tax?Report

        • Avatar Will in reply to Freddie
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          says:

          Yeah, I think that qualifies as a tax, however implicit.Report

          • Avatar Freddie in reply to Will
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            says:

            And in fact it’s worse, because the whole point of health care reform is to help people incapable of paying for health care on their own afford it. There’s no similar pants subsidy. The point is twofold: one, whether or not we call something a tax is a semantic argument, which is important for libertarians who like to invoke the bogeyman, but immaterial to the rest of us; and two, that we are in fact compelled by the material conditions of the universe to need certain things, like health care, and acknowledging that need is incumbent upon a rational society.Report

            • Avatar mike farmer in reply to Freddie
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              says:

              “And in fact it’s worse, because the whole point of health care reform is to help people incapable of paying for health care on their own afford it.”

              If this was true, the reform would simply ask us to pay for healthcare for people who can’t afford it.Report

        • Avatar Mark Thompson in reply to Freddie
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          says:

          The requirement itself is not a tax; the fine you will get, however, is, at least in the absence of criminal penalties.Report

          • Avatar Freddie in reply to Mark Thompson
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            says:

            How is the money I pay for mandated health insurance different from the money I pay for mandated pants?Report

            • Avatar Mark Thompson in reply to Freddie
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              says:

              It’s not. But, at least as far as I’m concerned, the tax isn’t the money you spend to buy health insurance, it’s the money you spend when you don’t. In the case of pants, the tax isn’t the money you spend to buy pants, it’s the money you spend when you don’t.Report

              • Avatar Silus Grok in reply to Mark Thompson
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                says:

                The money you pay when you DON’T do something, Mark, is a _fine_. Good heavens, do words mean nothing?Report

              • Avatar Mark Thompson in reply to Silus Grok
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                says:

                Silus:

                See my point below in response to Katherine. Beyond that, the “do/don’t” dichotomy doesn’t really work. When someone smokes a cigarette in a bar or runs a red light, they are clearly doing something, yet we call the fee they have to pay a fine rather than a tax. Perhaps taxes are a subset of fines (or vice versa)?

                I guess another distinction (not mentioned below) would be that a fine is something you pay when you commit an illegal act. But is it really a better characterization of the insurance mandate to say that it makes it illegal to be uninsured? To me, that is a much scarier proposition than calling it a tax.Report

    • Avatar Jaybird in reply to Freddie
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      says:

      If you’ve spent your life wearing kilts and the government has started issuing pants guidelines and threatening to throw you in jail for not wearing pants that reach between the dimples of your knees and the dimples of your ankles and if you do not purchase such pants from the following list of approved pant providers (you probably recognize the pant providers as the corporations who hired the lobbyists who wrote the “Cover Your Junk To Protect The Children” law in the first place), I do think that you would be justified in saying something to the effect of “this law is forcing me to spend money on something that I haven’t ever been forced to spend money on in the past… and the IRS will threaten me just like they would if I didn’t pay those taxes I paid in order to fund the war in Iraq.”

      Except we’re talking about the government saying that you have to wear pants, forever, for the rest of your life, even if you’re in the shower or on the toilet or trying to get your wife with child.

      This makes health insurance the equivalent of Mormon undergarments.

      And atheism is not an option.Report

  7. Avatar EngineerScotty
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    says:

    All 50 states require motorists to purchase liability insurance in order to drive. Is this a tax?

    Many professionals are likewise required to by insurance, post bonds, or otherwise ensure they are not judgment-proof, before they are allowed to ply their trade(s). Is this a tax?

    There are a couple differences–you can avoid the car insurance requirement by not driving, or by posting a bond of sufficient amount. And the purpose of the liablity insurance requirement isn’t to manipulate the risk pool (allowing riskier drivers to buy insurance cheaper by forcing good drivers to pay more), but to protect the public at large from devastating financial loss caused by accidents with the judgment-proof. The purpose of the mandate is to ensure that healthy people don’t opt out. Given that being a good driver is largely a matter of choice, and being healthy is largely not, this does make sense from a policy point of view–but still,

    Of course, some states do have no-fault auto insurance, which muddies the waters further…Report

  8. Avatar Katherine
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    says:

    I wouldn’t call it a tax. That’s like saying it’s a “tax” for a car to cost more because it includes mandatory safety features like a seat belt and air bags. Or the requirement for a restaurant to have X number of fire extinguishers is a tax.

    A tax is something where the money goes, at least temporarily, to the government. Requirements to buy things cause money to go to the people who are selling the stuff. I don’t like the mandate – I think, without a public option, a bill with a mandate is likely to make things worse for people overall – but tax isn’t the right term.

    I understand conservatives dislike both taxes and regulation. But there actually is a difference between those two things.Report

    • Avatar Mark Thompson in reply to Katherine
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      says:

      The tax isn’t the mandate itself; it’s the fine (which goes to the government) by which the mandate is enforced. I argue in the trackbacked post below that as a legal matter, it’s far better for reform advocates to consider this a “tax” than anything else. As a political matter, I honestly don’t think it matters much how you characterize it.Report

      • Avatar Katherine in reply to Mark Thompson
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        says:

        It seems more accurate to call it a fine rather than a tax, then. I wouldn’t call a speeding ticket or a library fine a tax.Report

        • Avatar Jaybird in reply to Katherine
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          says:

          “Revenue Enhancement”Report

        • Avatar Mark Thompson in reply to Katherine
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          says:

          If you call it a fine rather than a tax, then you’re on much weaker constitutional footing. Moreover, there’s not really a qualitative difference between fines and taxes, at least to the extent that fines don’t come with an option for criminal penalties. To the extent there is a difference, it’s usually that taxes are significantly less burdensome, whereas fines are intended as pretty severe penalties (income taxes excepted, of course). “Sin” taxes are essentially intended to force users to internalize alleged (and sometimes even actual!) externalities. Fines on the other hand are typically punitive in nature rather than remedial. On the margins, there is really no material difference between a fine and a tax. At the extremes, though, you get a pretty clear sense of the difference.

          So, a $.25 fee paid to the government whenever one buys a $3.00 pack of cigarettes is a tax intended to raise revenue and make the smoker pay for the externalities imposed on the health care system and by the alleged effects of second hand smoke. On the other hand, a $500 fee incurred whenever one lights up a cigarette indoors in a bar is a fine intended to push the cost of doing that so high that it will be undesirable to do so – raising revenue barely factors into the equation at all because of how much smoking indoors the law expects to deter.

          I’m not sure how worthwhile it is to distinguish between these two concepts, though, because at the margins they really are indistinguishable. What do you call something that is equally intended to impose an unacceptably high price on an activity and to raise revenue for the externalities allegedly imposed by that activity? In the case of huge cigarette taxes, we call them taxes; in the case of Washington, DC red light cameras, we call them fines, even though the amount owed on any given ticket is quite minimal.

          In this case, though, one of the primary justifications for the mandate penalty – indeed, the primary justification – is to make the uninsured (but theoretically well-off enough to afford insurance on their own) pay for the externalities of emergency room care (covered by the taxpayers) and of not participating in a risk pool such that costs for participant in that risk pool are driven up. AFAIK, the mandate penalty will not be set so high as to make it utterly intolerable to be uninsured – for many people in this group, indeed, it will remain economically preferable to pay the penalty rather than purchase insurance on their own.Report

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