The more I think about the Obamacare ruling, the more I like it. I think Roberts was brilliant. Consider what he did.
1. He took the Commerce Clause out of the equation. He said you cannot use the Commerce Clause to compel people to purchase a commodity, and to try to do so is unconstitutional. This undermines many prior decisions, like ones under the Commerce Clause that said a farmer cannot grow a particular crop even for his own use on his own land if that crop in general is a regulated commodity that is part of interstate commerce. Thus, he struck down the individual mandate as a penalty based on the Commerce Clause.
2. He took Obama's campaign argument of an activist court away from him since this opinion was a liberal majority opinion. That is huge.
3. In doing so, Roberts removed the issue from being a legal issue to a political issue, throwing it from the courts back into the lap of Congress. He says it is not the Court's place to determine if it is good law, but just to determine whether it is constitutional.
4. He branded Obama and Pelosi and Reid and all the rest as bald faced liars. If you recall, Obama had an interview with George Stephanopolus (sp?) and George kept insisting it was a tax, not a penalty. Obama got very excited and over and over kept telling George it was definitely not a tax, it was a penalty, and would only be imposed if you don't buy health care. When it was debated in Congress, it was always debated as a penalty and everyone denied it was a tax, even though it looked and smelled like a tax. Everyone knew it never would have passed if it was presented as a tax. Landrieu and Ben Nelson would never have voted for a huge tax increase. In the actual language of the legislation, it is declared a penalty and not a tax. Nowhere in the legislation is it ever referred to as a tax. Then, in arguments before the Court, the Solicitor General argued it both ways. He said it was a penalty, and then argued it was a tax. Scalia chided him on it but the argument was what it was. The Solicitor General gave Roberts what he needed.
5. Roberts decided to write the decision himself, and the liberal justices did not agree with his reasoning - something he anticipated and led him not to let one of them write the opinion, and he removed the Commerce Clause from consideration (something Ginsberg did not agree with) and said it would be unconstitutional to try to do this under the Commerce Clause. That was the driving engine of the legislation and he took that completely away from Congress, and took away from them any future attempts to use the Commerce Clause for anything similar. Then he took away the penalty, and said that it would be unconstitutional to penalize someone for not engaging in commerce. At that point he could have simply sided with the others and ruled the whole thing unconstitutional. That would have put all the focus on the Court and gotten the liberals all stirred up to support Obama. But he didn't.
6. In a convoluted chain of reasoning, which does not really sound like something he would ordinarily do, he decided to uncover the stink for what it is. In spite of Obama and his minions arguing repeatedly that it is a penalty, not a tax, Roberts, arguing that it is the Court's duty when possible to keep a law passed by Congress alive, ruled that no matter what they called it and no matter how they couched it in the legislation, it has the nature and characteristics of a tax, not a penalty, and he ruled it is a tax. Again, dropping it back in Obama's lap and Congress' lap. He dropped a huge tax increase right into Obama's lap, took away the Commerce Clause option, and then said that if States do not want to participate in the expanded medicaid, the HHS cannot withhold from the states the other Medicare/Medicaid money they are already getting, practically guaranteeing Romney will win. Obama has so many statements on the record about how he knows it would be bad to impose a tax in such an economic environment, and how he argued over and over that it was a penalty and not a tax, Romney has enough sound bites to last the whole campaign.
7. What Romney has to do now is explain clearly what he means by "replace" when he says he will repeal and replace Obamacare. Some provisions are popular with people, like coverage for pre-existing conditions; no lifetime limits for certain conditions; keeping your health insurance as you move from company to company, etc. He will also have to include tort reform (which Obamacare does not, taking care of his lawyer buddies) for if he does not do this, medical expenses will never be brought into control; and allow national marketing of health insurance instead of state limited marketing. How he deals with people who are not now covered, or how he deals with illegal aliens, are things that will have to be thought out very carefully, as well as how to pay for it. Engineering a very robust economy could go a long way to address these issues.
8. The tort reform issue is critical. Many OB/GYNs, for example, do not do that any more because of insurance costs. Most have to pay over a hundred thousand a year for their malpractice insurance, which is totally rediculous. If tort reform is not included in the "replace", nothing else will make much difference. It is the single biggest driver of medical costs, and it will only get worse.
9. Finally, Romney and everyone else keeps saying they have to repeal Obamacare. The other gift from Roberts was that he made it a tax, not a penalty. To repeal the statute, they will need a super-majority of 60 senators, and the attempt can be filibustered. But to repeal a tax, all they need is a simple majority and it cannot be filibustered.
10. If the tax originated in the Senate, then the 26 Attorneys General of the states who are parties to the lawsuit should file a motion in the Supreme Court, since it issued the ruling and they have 21 days to ask for reconsideration, and seek from the Court a decision on the constitutionality of the tax if the tax originated in the Senate. If it did, then it should be declared unconstitutional. The Court could not rule on that point in the original case since that fact of origination was never made a part of the record, nor should it have been since no one was arguing about a tax then. This way they could get rid of Obamacare now and not have to wait for the election, and they can blame it on the Senate democrats.
The tax in the 2,300-page monstrosity that created Obamacare is not just the penalty tax we have heard so much about in the news. Obamacare contains at least 21 tax increases. Estimates are that it will cost taxpayers more than $800 billion. Remember Obama promising no one making less than $250,000 a year would get a tax increase? The majority of those Obamacare increases will hit families earning less than $250,000 a year. What follows are the seven taxes hidden in Obamacare that will affect all Americans, not just some subset. Sean Hannity had these seven listed on his website:
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 (IRAs) 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.