Last week, the U.S. Supreme Court issued its ruling on healthcare reform. The future of healthcare reform turned on the notion of a penalty not being a tax for the purpose of a statute, but a tax for the purpose of constitutionality.
The Patient Protection and Affordable Care Act (PPACA), which starts in 2014, will impose a “penalty” on any individual not otherwise exempted or obtaining coverage from an employer, if the individual does not have health insurance with certain minimum benefits.
Noted the Supreme Court, “The ‘[s]hared responsibility payment,’ as the statute entitles it, is paid into the Treasury by ‘taxpayer[s]’ when they file their tax returns. It does not apply to individuals who do not pay federal income taxes because their household income is less than the filing threshold in the Internal Revenue Code. For taxpayers who do owe the payment, its amount is determined by such familiar factors as taxable income, number of dependents and joint filing status. The requirement to pay is found in the Internal Revenue Code and enforced by the IRS, which—as we previously explained—must assess and collect it ‘in the same manner as taxes.’ This process yields the essential feature of any tax: it produces at least some revenue for the Government.”
A majority of the Supreme Court thus concluded that when it comes to taxes, Congress has broader latitude in imposing them than it does on regulating commerce, and the individual mandate is constitutional when viewed as a tax for not having insurance rather than a requirement to purchase insurance.
To learn more and get detailed takeaways, click here to read the July edition of the PPAI Washington Report.