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Tuesday, September 25, 2012

Uninsured Tax Penalties Higher Than Expected

Uninsured Tax Penalties
When President Obama's Affordable Care Act passed in 2010, it was estimated that approximately four million Americans would have to pay the tax penalty for not purchasing health care insurance. The Congressional Budget Office is now stating that the estimate is about 50 percent higher than originally calculated, meaning that about six million Americans will face a tax penalty in 2016 when the new health care law is fully in effect.

Most people affected by the tax penalty would be in the middle class, with the average tax penalty totaling $1,200. That is a significant amount for the 80 percent of affected individuals and families who fall into the income level of less than five times the federal poverty level.

Although the law contains exemptions for low-income people and those with religious objections and other circumstances, the six million people affected by the penalty and others who oppose the health care law may view this as another tax increase, something President Obama had promised not to do. This appears to be a sticking point that many Republicans and opposers of the law have jumped on and referred to as a broken promise from the Obama administration.

So, where does the 50 percent increase come from? The Congressional Budget Office states that the increase is primarily due to the economy, high unemployment, lower wages and the effects of new federal regulations. The Obama administration continues to support the tax penalty mandate, stating that only 98 percent of Americans will be affected by it. In addition, the Health and Human Services Department emphasizes that the penalty is intended to affect people who simply refuse to buy insurance, even though they can afford it. Erin Shields Britt of the Health and Human Services Department states, “We’re no longer going to subsidize the care of those who can afford to buy insurance but make a choice not to buy it.”

It is estimated by the budget office that the anticipated tax penalties will add $6.9 billion to the federal budget in 2016.

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