Six million Americans face a tax season that may be unhappier than usual this year. Not because they’ll face intrusive questions from the Tax Man, but because it’s their punishment from President Obama for not complying with his signature healthcare law.
The Treasury Department announced this week that between 2 and 4 percent of all taxpayers lacked medical coverage for all or part of 2014 – the first year that the penalty for not carrying healthcare coverage is to be assessed.
The numbers could’ve been substantially higher though. Another 10 to 20 percent (some 15 to 30 million people) were uninsured but slipped out of Uncle Sam’s hands because they qualified for an exemption such as those who have experienced domestic violence, the death of a close family member, the cancellation of their health insurance coverage, or a natural disaster.
The President and architects of ObamaCare suspected that many Americans might never voluntarily opt in to his plan so they opted for coercion by mandating that everyone secure coverage (whether individually or through our employers) and then readied a penalty for non-compliance. For 2014 the penalty is $95 or 1 percent of household income when taxpayers file taxes. That stick will continue to grow over time.
In addition, according to the Administration’s estimates, between 3 and 5 percent of all taxpayers (4.5 to 7.5 million people) received ObamaCare subsidies to help pay for their healthcare plans. However, as we’ve reported before, some of those taxpayers may have to pay back the government because they underestimated their income for the year, while others will get a little more back in their tax returns for overestimating their income.
It’s going to be a longer and more frustrating tax season for millions of Americans. Don’t expect much help from the Internal Revenue Service either.
Bloomberg BusinessWeek reports:
Tax filing for 2014 opened Jan. 20, and the Internal Revenue Service’s Form 1040 — for federal income tax –includes a new Line 61 asking if the taxpayer has health insurance. Three-quarters of taxpayers won’t have to do anything more than check that box, said Mark Mazur, the department’s assistant secretary for tax policy. The remainder will have to to take additional steps, though most won’t pay a penalty, he said on a conference call with reporters.
The IRS has been preparing for additional strain during the tax season as people adjust to the rule, warning that about half the people who call its toll-free phone lines won’t be able to get through.
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The government will issue about 4 million new tax forms, called a 1095A, to people who received the tax credits, Kevin Counihan, the CEO of healthcare.gov, the federal insurance exchange, said on the call.
The tax penalties start at $95 and can be as much as $12,240 for a wealthy family.
“We’re not here to have a goal to get a certain fee income or to make this difficult for folks,” he said. “We want to get people insured and have the peace of mind of health insurance.”
The tax penalties this year will be modest and may not be a big deal for those who do not have coverage. However, as the years roll by those fines will increase substantially. The fine will jump in 2015 to $325 or 2 percent of income and, based on government numbers, in 2016, the average fine will be about $1,100 per household.
Carrying healthcare coverage is responsible and safe. We encourage as many Americans to carry it as possible, but that should be a voluntary decision that households make for themselves. Taxpayers don’t just have to purchase health insurance—they must select a policy that meets with government approval. The government should certainly not be taxing those who choose to pay for healthcare expenses out of pocket as needed or to go without coverage for sundry reasons.