Is the ACA a tax or not, and did Obama “lie”?

A 2009 Obama interview is circulating where Obama vehemently defends the ACA as not being a tax. Thus, so these people argue, the fact that the Supreme Court upheld it’s constitutionality on the basis of Federal taxation powers, Obama is a “liar” (???), even if the ACA’s provisions are more or less revenue neutral.

While I consider the debate over whether it’s a tax or not pointless, as is calling a campaign “promise” to not “raise taxes” a “lie” when “broken”, (one has to wonder if such people would consider a $10 billion tax cut that includes a $1 million spending provision also a “tax increase”….), how about thinking of this in terms of casino redistribution…

Say a casino has a 98% payout on its slots. Say the gaming commission then closes the casino and somehow arranges for the would-be customers to pay that 2% to the “government” instead of the 100% to the casino, and now the government will use that 2% to fund frequent lotteries for those that pay in.

This is a tax increase in the same way as Stephanopoulos declares the ACA a tax increase – money has been diverted to “the government” that previously was not diverted to the government. Never mind that this new lottery scheme has a net-zero effect on the “tax-payers” – it’s still a “tax increase” under this flawed definition because of the small increase in capital flow to “the govt”. But does this make any sense to fuss about whether this is a “tax increase” or not? I say stick to the principles – do you agree with the principle of social redistribution or not?

If you feel my analogy is flawed, let me lay out why I disagree. The ACA widens the pool of insured subscribers, increasing economies-of-scale and thus lowering aggregate premiums PER SUBSCRIBER. Those who have insurance right now will tend to pay LESS in premiums.

Those who aren’t buying insurance right now will, if their income is high enough, suddenly have to “pay more” (that is, something). Do these new “tax payers” get nothing in return? No – they do receive something. At minimum – if they don’t use the new insurance to take advantage of better preventative care (which has it’s own long-term payouts) they are now, at least, appropriately paying the “risk premium” of their disaster coverage, whereas before they were gambling on SOCIETY’S dollar – if (when) x% of them have a catastrophic injury PER YEAR, now the cost of their treatment has been appropriately assigned.

“But wait,” you say, “some y% of them will never have catastrophic health costs!” That’s true – but you’re ignoring another EXTERNALITY that everyone receives and takes advantage of, without explicitly paying for it – the fact that the costs and clean-up of everyone ELSE’S catastrophes are, in fact, taken care of expeditiously allows all the remaining people to proceed with their life with minimal interruption.

No one knows whether they’ll stay in that “lucky” (catastrophe-free) group for their (and their family’s) whole lives, but you cannot separate the costs of each group – they are intimately interwoven – people who experience a catastrophic highway accident have no interest in cleaning up the mess on the highway (or the hospital bills) if they are unable to use the highway or hospital anymore. The beneficiaries of a clean highway or readily accessible hospital system are all the REMAINING people – so they are the ultimate customers – and that is a good the requires payment one way or another. The ACA is just one of many ways to better assign those responsibilities to the beneficiaries, eliminating or reducing some amount of free-ridership, and thus making the whole system more economical.


About stormculture

In pursuit of reality.
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One Response to Is the ACA a tax or not, and did Obama “lie”?

  1. Pingback: A Simpler ACA “Tax” Comment… | Stormculture’s Weblog

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