Home > Economic Policy > Is Obamacare the Biggest Tax Increase in History? No

Is Obamacare the Biggest Tax Increase in History? No

Nope. Not at all. Kevin Drum debunks this one:

“There have been 15 tax increases of significant size since 1950, and Jerry Tempalski, a tax analyst in the Treasury Department, has estimated the size of all of them as a percentage of GDP.  Tempalski hasn’t estimated the eventual size of ACA, but PolitiFact took a crack at it using the same methodology, and they figure that ACA amounts to a tax increase of 0.49% of GDP seven years from now. That places it tenth on the list.”

And he supplies the table to the right as well.

Since the mandate is now defined as a tax, Obamacare does raise (optional) taxes. The President can no longer say otherwise. Politifact has dug up the transcript of an interview Obama did with ABC’s George Stephanopoulous and it’s good stuff:

Stephanopoulos: Under this mandate, the government is forcing people to spend money, fining you if you don’t. How is that not a tax?

Obama: Well, hold on a second, George. Here — here’s what’s happening. You and I are both paying $900, on average — our families — in higher premiums because of uncompensated care. Now what I’ve said is that if you can’t afford health insurance, you certainly shouldn’t be punished for that. That’s just piling on. If, on the other hand, we’re giving tax credits, we’ve set up an exchange, you are now part of a big pool, we’ve driven down the costs, we’ve done everything we can and you actually can afford health insurance, but you’ve just decided, you know what, I want to take my chances. And then you get hit by a bus and you and I have to pay for the emergency room care, that’s…

Stephanopoulos: That may be, but it’s still a tax increase.

Obama: No. That’s not true, George. The — for us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase. What it’s saying is, is that we’re not going to have other people carrying your burdens for you anymore than the fact that right now everybody in America, just about, has to get auto insurance. Nobody considers that a tax increase. People say to themselves, that is a fair way to make sure that if you hit my car, that I’m not covering all the costs.

Obama is right about everything here except declaring it not a tax increase. It is a tax increase, but it is a tax increase to correct a market failure. The President points the market failure out, but does not acknowledge that the way to correct it is through the tax. When Obama says “take a responsibility,” he means that individuals can either buy insurance or face a tax increase (which, in reality, is just the withholding of potential tax refunds). The reason for the tax seems to have been lost in the discussion of the Supreme Court’s ruling this past week, but it’s important to remember why it’s there. Without it, only unhealthy individuals would sign up for insurance and insurance companies, who can no longer discriminate based on pre-existing conditions, would get sucked into the “death spiral.”

By the way, check out what tax increase is fifth on the list: Reagan’s tax in 1982.

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Categories: Economic Policy
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