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Obamacare: Taxation by Misrepresentation?

Posted by Larry Doyle on June 29, 2012 8:54 AM |

Chief Justice John Roberts informed the nation yesterday that the legislation known as Obamacare is viable based upon Congress’ ability to tax. Should it matter that the legislation was not represented to the nation in that manner? That is a point worthy of very real debate for years to come.

While many conservatives in the nation are disappointed with Roberts’ opinion and ultimate deciding vote, I actually think he was more concerned with a larger message, if that is possible. What was he really saying? A number of things including:

1. Elections matter!

2. Just because politicians are not telling you something, look a little deeper, determine the truth, and appreciate what is really going on.

3. Anybody with a degree of ‘sense on cents’ could and should realize that the costs embedded in Obamacare are a tax. Just because they are not represented that way changes nothing.

4. Politicians on both sides of the aisle will LIE and INTENTIONALLY MISREPRESENT all the time.

5. Let the elections this November determine whether America wants this legislation.

As I ponder the hype and histrionics of the last day, I truly believe we are experiencing a semblance of what drove those to come and settle in our nation in the first place. What is that? Those settlers were inspired by an overwhelming force widely captured under the heading of “Taxation without representation is tyranny.”

Justice Roberts very compellingly slapped the American electorate in the face yesterday.

WAKE UP AMERICA.

If taxation without representation is tyranny, then what is taxation by misrepresentation? We will learn the answer to that question this November.

I am very interested to know how readers define “taxation by misrepresentation?”

Please share with us your thoughts on that question.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

 

 

  • JR

    At the beginning of the hearings by the Supreme Court on the ACA, the first question the justices asked the lawyers represenhting the government was whether the health care insurance mandate was a tax….to which those lawyers emphatically said no. During the rushed voting of the legislation, the same quesition was asked….and everyone in the Obama administration said it was not a tax…a number of those quotes are shown on today’s op-ed page.
    Justice Roberts has not done the country a favor by approving the legislation with the caveat thtat a mandate would be unconstitutional but as a tax it is perfectly ok. The key here, i believe, is that the legislation was framed as a mandate and not a tax….those voting for the legislation did so with that understanding.
    To the extent the vote was corrupted by the manner in which the legislation was articulated to members of Congress, the Supreme Court has validated a remarkable misrepresentation.

  • fred

    LD,

    So now we find out that the Supreme Court is part of the problem not part of the solution. No big surprise, aren’t they all political appointments?

    The ends justify the means. The Justices decided that they wanted Obamacare upheld, then found the justification to do so. Shouldn’t the Supreme Court Justices now be called the Supreme Court Justifiers?

    Why have liberalism and conservatism become synonymous with Democrat and Republican? The politicizing of ideals, say it ain’t so? That’s precisely why we need a third party to break the matrix.

    • LD

      Fred,

      I actually think Roberts was trying to throw this back to the public rather than having him decide the issue for everybody. How did he accomplish this? Highlight the fact that this truly is a tax.

      Did he waive his responsibility? You can certainly make a VERY strong case for that BUT chief justices are ALWAYS concerned with the immediate impact of their vote and then how it will stand up against history.

      I think he wrote his opinion and voted from that standpoint.

      If the public does not care for this legislation then they will vote out Obama and return the Senate to the Republicans so it can be overturned.

      That obviously is a high risk and precarious undertaking.

      The next 4 months will be VERY interesting.

      Miles to go

      • fred

        LD,

        You may be right, but we already had a mid-term election that shed some light on how the American public feels about Obamacare.

        Other issues such as immigration, the economy, women’s rights, gay marriage, etc., will skew the election outcome.

        Obviously both candidates believe in ‘universal’ healthcare,
        it’s just a matter of how it is ‘packaged’ and implemented.

        Why not include Obamacare as a Proposition on the national ballot?

        If what you say is true, what happens the next time a devisive issue reaches this Supreme Court and the court has no majority, do they punt again or do they apply the rules of law and render a decision?

  • Ginny

    Despite all the political rhetoric on both sides, the 2 questions asked of the Supreme Court were narrowly defined. Obama did not ask the Supreme Court to determine if they liked ObamaCare – they asked specifically if it was ok to mandate a tax and expansion of Medicaid.

    The SC said ok to mandate a tax and no to expansion.

    The SC comments however, appear to be in favor of a competitive system – so for the states opting out of interstate provider care – that may open up anti-trust violation lawsuits. Hawaii, for example, opted out of the interstate program.

    This was a case of clarification for mandated tax like social security – everything you always wanted to know but were afraid to ask. Yeah, its legal to mandate tax – but is it legal to mandate a penalty and call it tax?

    Put the banksters and corrupt politicians in jail and tax me for that – they have cost the American taxpayers enough money in the Trillion$ for bailouts and back door deals to pay for extraordinary health care for all Americans until the end of time.

  • Huckleberry

    We don’t really know how this piece of legislation is going to turn out, because it really hasn’t taken effect yet.

    I thought the individual mandate would be struck down per the Commerce Clause…. shows what I know.

    To those who claim the KNOW what will result, I’d suggest looking at W-appointee John Roberts. Until the decision, everyone KNEW that the swing vote was Anthony Kennedy, and look who went and swung the vote.

    I hope we do have an honest debate about healthcare. We need it, after all the obfuscation and fear-mongering (from “death panels” to Keep the Government Out Of My Medicare signs).

    Obama can defend a piece of legislation that has been ruled Constitutional, but has not actually taken effect. Romney can explain how this Constitutional piece of legislation is different from what he did as Governor of Massachusetts.

  • LD

    A compelling read and one with which I largely agree.

    The Case for John Roberts

    And while he did not eliminate Obamacare for us, isn’t it fair of him to ask why we can’t do that for ourselves, in November? He’s given us a huge constitutional victory, why can’t we respond with an equally large electoral victory in five months? It is unreasonable to expect the Court to solve all our problems, isn’t it?

  • Ray

    Hi Larry,

    My main concern with the healthcare system in the US (I grew up in Canada) is as follows:

    1. One can go bankrupt here because of health issues (this can’t happen in a good number of developed countries: PBS did a special some time ago on this matter).

    2. Immoral insurance companies can deny one with pre-existing conditions and limitthe amount of lifetime costs they will pay (hurting the poor and the middle class the most)..

    3. If you can’t afford health insurance (more and more can’t because of the economic degradation of the middle class), you have a greater chance of dying than the rich.

    4. The Republicans & Romney haven’t provided any specifics on how they would reform healthcare (which is much needed in this country). At least Obama has moved on the issue (in many specifics forward and some backward).

    Can we keep from being involved in every international dispute and allow other countries to take the lead with our support? Maybe fewer of our men and women will die, fewer will live life without legs, arms and PTSD and we will have more dollars to spend in the right areas such as infrastructure like broken down bridges, electrical grids etc.

    Do we have any visionary leaders in this country who honestly care about this land instead of allowing greed, corruption and personal glory to dominate the landscape, the rich to get obscenely rich and the poor and middle class to suffer more and more. Where are we headed and how will it end for us? Not well I am sure!!

    Did you see Matt Taibi on PBS with Bill Moyers the other night?

    Have a blessed weekend. Love what you do!!

    • LD

      Ray,

      Your points are very well taken. How do we accomplish the points you highlight in a manner consistent with a manner that does not impose an ever growing bureaucracy with all its problems on our citizens. The problems you highlight are very real and very painful. Is Obama’s cure for these ills the best we can do?

      You are right. Shame on ALL the pols who have tolerated and profited from a system that has failed to address these critical issues. I am led to believe that if we took the cronyism out of the equation we may actually get somewhere.

      • Ray

        Larry,

        If we ever get true visionary leadership in this country, anything is possible. If the number one question politicians will keep asking is “What can I do to stay in power rather than what can I offer to make this country really great again, then we have a chance.” Otherwise it is lights out.

        If we ever get leadership that is more interested in the country and its people than lining their pockets with corporate money and gifts for themselves and their children, then we will have a chance. Otherwise it is lights out.

        May God raise up true visionary leadership!!

        Have a great and blessed day…

  • LD

    Are people aware of all the different taxes embedded within Obamacare?

    While we were all debating the cost to our liberty due to the Patient Protection and Affordable Care Act (ObamaCare), we were ignoring the cost to our pockets. If there ever was a reason for bipartisan rage about this law, it should be on the twenty – yes, twenty – hidden new taxes of this law. Making matters even more relevant is that seven of these taxes are levied on ALL citizens, regardless of income. Hence, Mr. Obama’s promise not to raise taxes on anyone earning less than $250,000 is just another falsehood associated with this legislation.

    The first, and best known, of these seven taxes that will hit all Americans as a result of ObamaCare is the Individual Mandate Tax (no longer concealed as a penalty). This provision will require a couple to pay the higher of a base tax of $1,360 per year, or 2.5% of adjusted growth income starting with lower base tax and rising to this level by 2016. Individuals will see a base tax of $695 and families a base tax of $2,085 per year by 2016.

    Next up is the Medicine Cabinet Tax that took effect in 2011. This tax prohibits reimbursement of expenses for over-the-counter medicine, with the lone exception of insulin, from an employee’s pre-tax dollar funded Health Saving Account (HSA), Flexible Spending Account (FSA) or Health Reimbursement Account (HRA). This provision hurts middle class earners particularly hard since they earn enough to actually pay federal taxes, but not enough to make this restriction negligible.

    The Flexible Spending Account (FSA) Cap, which will begin in 2013, is perhaps the most hurtful provision to the middle class. This part of the law imposes a cap of $2,500 per year (which is now unlimited) on the amount of pre-tax dollars that could be deposited into these accounts. Why is this particularly hurtful to the middle class? It is because funds in these accounts may be used to pay for special needs education for special needs children in the United States. Tuition rates for this type of special education can easily exceed $14,000 per year and the use of pre-tax dollars has helped many middle income families.

    Another direct hit to the middle class is the Medical Itemized Deduction Hurdle which is currently 7.5% of adjusted gross income. This is the hurdle that must be met before medical expenses over that hurdle can be taken as a deduction on federal income taxes. ObamaCare raises this hurdle to 10% of adjusted gross income beginning in 2013. Consider the middle class family with $80,000 of adjusted gross income and $8,000 of medical expenses. Currently, that family can get some relief from being able to take a $2,000 deduction (7.5% X $80,000 = $6,000; $8,000 –$6,000 = $2,000). An increase to 10% would eliminate the deduction in this example and if that family was paying a 25% federal tax rate, the real cost of that lost deduction would be $500.

    The fifth new tax on the middle class, and all Americans, is the Health Savings Account (HSA) Withdrawal Tax Hike. This provision increases the additional tax on non-medical early withdrawals from an HSA from 10% currently to 20% beginning in 2013. This provision actually sets these accounts apart from Investment Retirement Accounts (IRA’s) and other tax advantaged accounts, all of which remain with a 10% early withdrawal tax.

    Another regressive tax that is part of this law began in 2010 and that is the Indoor Tanning Services Tax, which places a 10% excise tax on people using tanning salons. While some may regard this as insignificant, the broader implication is that this act of taxation is a blatant move by the federal government to control the behavior of citizens. This provision, as does the Individual Mandate and as Justice Kennedy said during the oral arguments on the constitutionality of the law said, “….fundamentally changes the relationship between the federal government and the citizen.”

    The seventh new tax that directly impacts the middle class, along with all citizens, is the Excise Tax on Comprehensive Health Insurance Plans or the “Cadillac” Health Insurance Plan Tax. These are plans that provide extensive coverage and that are generally fully paid for, or largely paid for, by employers. This provision imposes a 40% excise tax on the employer paid premium on taxpayers who are covered by such plans, beginning in 2018. The reason it begins in 2018 is because most unionized workers are covered by plans that fall under this definition and a deferral was made to spare union members from this tax for at least a period of time.

    There are thirteen other taxes that apply to businesses and that apply to high income (over $250,000 per year) households. While these additional provisions will not impact the middle class directly, they can have serious indirect consequences for middle and low income earners. Beginning in 2014, the Employer Mandate Tax will impose an annual non-deductible tax on employers with more than 50 employees who do not provide health insurance for their employees.

    The impact of this provision on low and middle income earners, and really all working Americans, is that employers will be confronted with three choices. The first is provide some level of health insurance, as many do today, and there would be no impact on employees. The second choice is to pay the penalty, which would most likely be less expensive than providing health insurance, and force employees to seek their own health insurance or purchase it through federal government controlled state exchanges. Studies have estimated that 20 million Americans will lose their employee funded health insurance as a result of this provision and employers electing this option. The third choice is for employers to lay off employees, or not hire additional employees, because ObamaCare forces them to either provide health insurance or pay the new tax.

    Another new tax, the Tax on Medical Device Manufacturers that begins in 2013, places a 2.3% excise tax on all items retailing for more than $100. This provision will not only drive up the cost of various medical devices ranging from mobility assistance devices to personal testing supplies, but will also impact an industry that employs 360,000 people in 6,000 plants across our country. This tax, while not a direct tax, would have significant negative impact on the middle class.

    The Surtax on Investment Income for households earning $250,000 and more, beginning in 2013, will raise the Capital Gains Tax from 15% to 23.8% on investment income for these households and will raise Taxes on Dividends from 15% to 43.4% for the same households. Aside from the impact on retired citizens dependent on dividends, this provision will pull income from the private economy. In addition, the tax rate on Other Investment Income earned by Subchapter S Corporation (which many small business are organized as, allowing the owners to claim all business income as personal income) will rise from 35% to 43.4%. This part of the provision would place additional pressure on small businesses resulting in more layoffs and less hiring, impacting all American workers.

    All but one of the remaining new taxes in ObamaCare are directed at health industry businesses and while they will not impact middle income families directly, the additional costs will most likely be passed on to the public. The last new tax is really interesting, it is a tax on certain biofuels!

    These are the facts. It does not matter if you support Mr. Obama and his new law or if you oppose it, the new taxes on the middle class or real and all Americans should understand their impact on their families and the economy. Citizens, regardless of political beliefs, should recognize that ObamaCare was passed with almost no sunlight shined on these middle class tax increases and need to understand that the new law was sold with the promise that there would be no new middle class taxes. This is not partisan, it is simply the reality of politics.

  • JR

    What Was Roberts Thinking?

    An essay by Richard Epstein that adds to this discussion.

  • LD

    Another fascinating read which addresses the feelings and concerns of a surgeon. Why is he so concerned about Obamacare?

    “I’ve actually had a lot of experience working in all different types of environments,” he began. “I’ve worked in a government-run socialized medical care system, and I saw the waste and inefficiency.

    “The longer people worked in that system, the less work they wanted to do, because the more you wanted to do, the more they dumped on you. So after a while you stop doing it, because they’re not paying you to do more. Why should you do a difficult case, a difficult surgery that will take you hours and hours to do?

    “You might start out wanting to do it, but after a while, you just run out of energy, because there’s no incentive. You’d have to be a superhuman being to continue to work in that system and not be worn down by it.

    “Because nobody wanted to work, it would take an hour to turn over the surgical room. In my private practice now, it takes ten minutes.

    “And I saw tremendous waste: closets of stuff that never got used. Nobody cared.

    I strongly encourage people to read, A Surgeon Cuts to the Heart of the Obamacare Nightmare

    • Beth

      I’ve worked for a state run agency, you are so right…the mindset is spend the money you get from the state, the federal government, grants etc… Because, if you don’t spend it, you will loose it in the future. And you’re absolutely right… no incentive to work.

      • Beth

        LD
        I just read that article re the surgeon… I’m a real estate appraiser, work for myself… this is happening in my profession, the Government with it’s clammy mitts intervening at every level. The average age of a real estate appraiser is over 50 yo. There is no incentive for college grads to get into this profession. The government has killed it esp. Fannie & Freddie; when you a bankrupt government entity or whatever you want to call it now, setting guidelines for appraisers, you really have to wonder… what is going on?

  • fred

    The opinion of the dissent, Obamacare ruling. (compliments of ZH and Art Cashin)

    The Court today decides to save a statute Congress did not write. It rules that what the statute declares to be a requirement with a penalty is instead an option subject to a tax. And it changes the intentionally coercive sanction of a total cut-off of Medicaid funds to a supposedly noncoercive cut-off of only the incremental funds that the Act makes available. The Court regards its strained statutory interpretation as judicial modesty. It is not. It amounts instead to a vast judicial overreaching. It creates a debilitated, inoperable version of health-care regulation that Congress did not enact and the public does not expect. It makes enactment of sensible health-care regulation more difficult, since Congress cannot start afresh but must take as its point of departure a jumble of now senseless provisions, provisions that certain interests favored under the Court’s new design will struggle to retain. And it leaves the public and the States to expend vast sums of money on requirements that may or may not survive the necessary congressional revision.

    The Court’s disposition, invented and atextual as it is, does not even have the merit of avoiding constitutional difficulties. It creates them. The holding that the Individual Mandate is a tax raises a difficult constitutional question (what is a direct tax?) that the Court resolves with inadequate deliberation. And the judgment on the Medicaid Expansion issue ushers in new federalism concerns and places an unaccustomed strain upon the Union.

    Those States that decline the Medicaid Expansion must subsidize, by the federal tax dollars taken from their citizens, vast grants to the States that accept the Medicaid Expansion. If that destabilizing political dynamic, so antagonistic to a harmonious Union, is to be introduced at all, it should be by Congress, not by the Judiciary. The values that should have determined our course to- day are caution, minimalism, and the understanding that the Federal Government is one of limited powers. But the Court’s ruling undermines those values at every turn.

    In the name of restraint, it overreaches. In the name of constitutional avoidance, it creates new constitutional questions. In the name of cooperative federalism, it undermines state sovereignty.

    The Constitution, though it dates from the founding of the Republic, has powerful meaning and vital relevance to our own times. The constitutional protections that this case involves are protections of structure. Structural protections—notably, the restraints imposed by federalism and separation of powers—are less romantic and have less obvious a connection to personal freedom than the provisions of the Bill of Rights or the Civil War Amendments. Hence they tend to be undervalued or even forgotten by our citizens. It should be the responsibility of the Court to teach otherwise, to remind our people that the Framers considered structural protections of freedom the most important ones, for which reason they alone were embodied in the original Constitution and not left to later amendment. The fragmentation of power produced by the structure of our Government is central to liberty, and when we destroy it, we place liberty at peril. Today’s decision should have vindicated, should have taught, this truth; instead, our judgment today has disregarded it.

  • Ed K

    In the declaration – the founders state that there are certain inaleinable rights and that among these (but not exclusive) are life, liberty and the pursuit of happiness.

    The declaration then goes on to identify the purpose of government is to ensure these rights. The constitution provides limits and bounds to this including the inumerated powers of congress. Where is health care enumerated in these powers of congress? Isn’t this where admentments come into play. There is long history of expanding the power of government throught the interstate commerce clause.

    Originally the founders thought that a head tax was the way to fund the government – sending a bill to each of the states and the states would divy it up as poll tax – each adult male would pay the same amount.

    There is some argument that even with the 16th amemdment income tax is not appropriate. The reason I mention this it adds to the complexity of the issue.

    Under Justice Roberts logic, as Justice Scalia pointed out, the government can force the public to buy vegetables and call it tax.

    You can have all sorts of subtle arguments on Justice Roberts intent and truly the ballot is where American can voice their opinion but for me it is plain and simple you can’t call forcing the american people to buy health insurance a tax especially as it conflicts with our right to life, liberty and pursuit of happiness. Where is the liberty in that. Thomas Sowell points our a similar argument although more elegantly.

    I like what one congressman Paul said:

    “Today we should remember that virtually everything government does is a ‘mandate.’ The issue is not whether Congress can compel commerce by forcing you to buy insurance, or simply compel you to pay a tax if you don’t. The issue is that this compulsion implies the use of government force against those who refuse. The fundamental hallmark of a free society should be the rejection of force. In a free society, therefore, individuals could opt out of “Obamacare” without paying a government tribute.”

    Like I said at the beginning the purpose of government is to ensure our inalienable rights and freedoms. It did not happen with the recent Supreme Court decision.






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