03.31.2010 0

The Individual Mandate Non-compliance Penalty: Tax or Fine?

  • On: 04/12/2010 10:32:12
  • In: Health Care
  • By Victor Morawski

    An inherent hazard for those of us writing commentaries on current events is, of course, that current events change. Like Bob Dylan used to do with his songs, I usually carry an article on which I am working around in my head for several days, or even a week, before committing a single word of it to paper.

    This can be, as most readers will notice, just enough time for the current political landscape to change in ways that make even the best article topics out-of-date or, at worst, totally obsolete. Something of the sort happened to me this past week.

    Months ago I wrote a piece from the perspective of an ethicist challenging the morality of individual mandates in general, both for auto and health insurance, because such mandates by government override individual choice (autonomy) in a way that is unjustified and morally wrong. In issuing these sorts of mandates, government in effect immorally shows disrespect for us as human beings by ignoring the fact that, as rational individuals, we have our own priorities for how we wish to manage and allocate our own resources—priorities with which government should not normally interfere.

    This week I planned to add to points I made there with an additional reason why I believe such mandates to be immoral actions by government: In order to work—in order to effectively manipulate our behavior as society wants it to be manipulated— these sorts of mandates have to recommend as sanctions, penalties for non-compliance that do not fit the supposed crime.

    Because the proposed penalties for health care individual mandate non-compliance (thousands per family and possible jail time) are way out of line and much too severe relative to the supposed offense—my argument would have gone— those proposed penalties are, as a result, unfair and immoral.

    But some of the above is now made moot due to a document recently released to the public (March 21, 2010) by the Joint Committee on Taxation which explains and seems to temper the penalties somewhat and soften the role of the IRS in their enforcement.

    While the dollar amounts of the proposed yearly penalties—eventually $695 per individual and up to $2085 per family—have not changed and while these penalties are still to be assessed on one’s income tax “as an additional amount of Federal tax owed,” importantly these amounts are now held to be “not subject to the enforcement provisions of subtitle F of the Code.” For those readers who are not tax attorneys, it is subtitle F which gives the IRS legal authority to enforce income tax laws, both with civil and criminal penalties.

    As it points out, “Non-compliance with the personal responsibility requirement to have health coverage is not subject to criminal or civil penalties under the Code…” The IRS cannot use “liens and seizures” to collect the non-compliance “penalty” nor charge interest on uncollected outstanding amounts.

    Are the above changes now enough for me to concede that the penalties now fairly fit the crime? Is there even now a crime for them to fit if criminal penalties no longer apply?

    This has caused at least one liberal commentator to spin the above positively and say, in effect, “See, we are not turning these people into criminals. We are merely charging them a ‘Personal Responsibility Tax’. We are asking them to pay a tax to society for not assuming their personal responsibility to purchase health insurance.” Since I believe that we have no such personal responsibility (defended in my former column) I also believe society has no right to charge us a fee—call it what you will—for our failure to assume one.

    So is the penalty a fine or a tax? Let me in response paraphrase an often-quoted, anonymous bit of wisdom: “A fine is a tax you pay for something you did. A tax is a fine you pay for something you didn’t do.”

    Victor Morawski, professor at Coppin State University, is a Liberty Features Syndicated writer for Americans for Limited Government.


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