The Senate Is Right to Repeal Obamacare in Tax Bill

Supreme Court ruled Obamacare a tax; tax reform can and should repeal it
By Jeffrey A. Tucker, Foundation for Economic Education
December 21, 2017 4:39 pm Last Updated: December 23, 2017 2:37 am

As expected, The Washington Post and The New York Times expressed their outrage in scathing editorials.

The New Yorker followed suit. “Using a tax bill to abolish the individual mandate amounts to a backdoor way of sabotaging Obamacare,” wrote John Cassidy.

And even the fashion magazine Vogue commented on this unfashionable act. “Republicans and Donald Trump have counted on that (as well as your limited outrage bandwidth) in slipping an Affordable Care Act mandate repeal inside their insidious tax bill,” wrote Bridget Read.

All this howling is because the GOP-controlled Senate used a tax bill to repeal a health bill. Under the new tax law, there no longer is a penalty if you don’t sign up for Obamacare, one of the biggest motivators to sign up for it at all.

So the mainstream press implies that removing this penalty in a tax bill is something shady and duplicitous, like an exercise in false pretense.

It’s a Tax

Actually, there is absolutely nothing shady about the repeal of the Obamacare mandate. There is no back door here, no bait and switch. Obamacare’s much-despised individual mandate is, in fact, a tax. So it is properly dealt with in a tax bill.

This is precisely what the Supreme Court itself ruled in National Federation of Independent Business v. Sebelius (2012). It was widely seen as the ruling that codified Obamacare, giving it the constitutional gloss it needed to stay a law.

Ironically, the law has been challenged on many grounds, including that it is unconstitutional for Congress to force the people to purchase a service. The court said that this might not pass muster if that was indeed what Congress was doing. Instead, the court ruled the individual mandate should be considered a tax like any other. Taxes are permissible. Therefore, Obamacare was completely fine. To make it work, it had to be a tax, which now has become its downfall.

Actually, there is absolutely nothing shady about the repeal of the Obamacare mandate. There is no back door here. No bait and switch. Obamacare’s muchdespised individual mandate is, in fact, a tax. So it is properly dealt with in a tax bill.

Said the court: “The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.”

Further, “it is abundantly clear the Constitution does not guarantee that individuals may avoid taxation through inactivity. A capitation, after all, is a tax that everyone must pay simply for existing, and capitations are expressly contemplated by the Constitution.

“The Court today holds that our Constitution protects us from federal regulation under the Commerce Clause so long as we abstain from the regulated activity. But from its creation, the Constitution has made no such promise with respect to taxes.”

To be sure, the ruling was a bit of an embarrassment for Obamacare proponents because they never liked to talk about the mandate as a tax. It was a payment for wonderful services. The court said it is true that forcing people to buy something would contradict precedent. So in order to beat back the challenge, the majority found a clever way of redefining the nature of the mandate itself.

At this, Obamacare proponents, while a bit red-faced, expressed relief. At least the legislation gets to stay, thanks to an ideologically driven court majority.

Let the Market Work

The Senate is merely deferring to what the court said and nothing more. The highest court in the land said that the mandate—which is the heart of the legislation—should be regarded as a tax. Fine, the Senate couldn’t repeal the bill in health care legislation. So they listened to the court and did exactly what they were supposed to do all along: treat the monstrosity as a tax in a tax bill.

The people who are outraged today are only tasting their own medicine, nothing more.

Thus, should the repeal be seen as another way in which this legislation is a tax cut for the American people? Will it destabilize health insurance markets? Yes and no. Without the mandate, Obamacare might not survive. But Obamacare is not a real market. It is a fake market. Then there is the question about the insurance subsidies that the tax bill doesn’t address.

However, if individuals do not face the penalty tax of 2.5 percent of their household income (a minimum of $695 per year), people are free to choose whether to sign up for it or not. And given that people only started to sign up in large numbers after the penalty was introduced, and that Obamacare rates in the blue states that voted for Trump showed the highest increases in health insurance premiums, it’s not difficult to guess what this choice will be.

What this tax repeal does is begin to let the market function again. True, there are many more reforms that will be necessary to make health insurance work properly again. But this is a good beginning. And it was done entirely properly, precisely as the Supreme Court itself said it should be done.

And in a year when the mainstream media thought Trump would not get anything done, he managed, just before Christmas, to deliver on two election promises in one go.

Jeffrey Tucker is director of content for the Foundation for Economic Education (FEE). He is the author of five books, including “Right-Wing Collectivism: The Other Threat to Liberty.” This article was first published on FEE.org

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.