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Obamacare and SCOTUS: Why are Progressives celebrating a 54 billion dollar tax hike on low-income families?

The rationale offered by the Supreme Court in upholding the insurance mandate provisions of the health care reform law known as Obamacare hinged on regarding the mandate, and its related penalties for not buying insurance, as functionally equivalent to a tax.

A piggybank with a stethoscope and stack of money.

Photo: 401K 2012 / Flickr

The law does not depend on the mandate to contain health care costs. That can be done by liberalizing trade of prescription drugs and other measures. It does not depend on the mandate to avoid the problem of free-riders. That  is already done by narrowing the window during which one can enter the insurance market every year.

The law depends on the mandate because a good chunk of the revenue to pay for subsidized private-label insurance comes from fines – or, as SCOTUS would have it, taxes – paid by those households too poor to pay for insurance under the new program.

How much are the mandate provisions expected to raise in federal revenue? According to the non-partisan CBO (see table 2 here) the mandate-related penalties for those too poor to afford insurance will amount to 54 billion dollars over the 2012-2022 period.

It is, in other words, a way of implementing a highly regressive tax to fund the coverage expansion. And it is, as such, a highly unfair way to pay for that program: it takes from low-income families who will be denied medical insurance to help other low-income families pay for theirs.

All of which leaves me perplexed as to why progressives, and democrats more generally, are celebrating the fact that SCOTUS ruled in favor of these provisions. Surely the 54 billion in revenues can be collected in some other, fairer, way.

(And just to put the new 54 billion dollar tax on low-income families in context: the tax on big banks implemented to recover TARP-related losses is estimated by Treasury to collect in all 41 billion dollars.

Surely bankers deserve to bear the burden of mitigating the poverty-inducing effects of their actions rather than low-income households whose financial troubles, and consequent lack of health insurance, are largely caused by the bankers’ malfeasance and fraud)

(Update: crossposted at kgblogz)

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