KERN: Obamacare’s tax break

What if we could get a big discount on Obamacare? Would it make this destructive program less destructive, or at least less painful? Photo: (AP)

ANDERSON, IN, December 20, 2013 — Could something be good about Obamacare? Not really; but there is a silver lining, and the possibilities shrouded in that lining raise more questions than it answers.

But these are questions that must be answered, before Obamacare, officially The Patient Protection and Affordable Healthcare Act, can go forward.

When the Supreme Court of the United States declared that Obamacare can stand, it did so under the novel concept that Obamacare was really a tax, not some takeover of a sixth of the economy. Since the federal government somehow has a constitutionally-unlimited power to tax, Obamatax was constitutional. So said a majority of The Nine Robes.

If Obamacare is not a tax, it’s unconstitutional. So the mandate – the requirement to “buy insurance”  - is really just a tax. The “buying” part of Obamacare is a tax. Otherwise, Obamacare is unconstitutional.

Counterintuitive and illogical as that may seem to those without a convoluted legally-trained, twisted mind, there may be a construct buried in there that can work to partially assuage the financial devastation individuals face as they are forced to buy health insurance.

If, as the SCOTUS maintains, the mandate and penalties are really taxes, then the costs of the premia, and the costs of administration, must all be tax-deductible. It may also be that the sky-high deductibles and co-pays built into the policies are tax-deductible as well. This means that Obamacare is perhaps only about two-thirds as expensive as what we see on paper. Though it still constitutes a tremendous cost and a dead weight on the American economy, any “buy two, get one free” discount is better than none. What will happen when some smart CPA writes off the costs of Obamacare as tax-deductible?

There are a few other angles that have not been explored, and these should concern Obamacare’s most-ardent supporters, among whom are the poor, the unions, the big, exempted employers. If Obamacare is a tax, what are the subsidies? Are they not taxable?

What will happen when the IRS suddenly decides that the subsidies and maybe the exemptions, too, have cash value and should be treated as income?

Now, no one in the real world thinks that Obamacare will be treated the same as anything else in the world, just as the President Himself is separate and distinct from all laws. But shouldn’t someone be asking these questions, before they hit the fan?

Americans need to know; there are grave consequences to ignorance, and we have not begun to explore them. We need to.


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Tim Kern

Tim Kern taught economics for fifteen years, and discovered that understanding life is easy; it’s recognizing reality that takes practice. He holds a music degree, and later earned an MBA in finance from Northwestern University. He has lived across the US, and now makes his home in Anderson, Indiana.

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