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Tax Feud Emerges Over Health Insurance Mandates

A key feature within health care proposals emerging from Congress and the White House is a mandate for all Americans to purchase insurance. But is a mandate a tax? Two experts discuss the topic with Gwen Ifill.

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    As the health care debate rages, one key common feature has emerged in plans emerging from the House, the Senate, and the White House. All would require Americans who are not covered by employers to purchase insurance on their own, in some instances with government help. Those who don't would pay a penalty.

    Under the Senate version being hashed out in Senator Max Baucus' Finance Committee this week, uninsured individuals with incomes of between 100 percent and 300 percent of the federal poverty level — up to about $32,000 a year — would be subject to up to $750 a year in penalties. Families of four earning up to roughly $66,000 could be fined up to $1,500 a year, if they remain uncovered. Higher earners could be fined $950 a year for individuals or up to $3,800 a year for families.

    The House version would penalize uninsured individuals and families 2.5 percent of their adjusted gross income, topping out at about $4,800 for an individual. Both measures would offer subsidies to low- and moderate-income Americans to offset the cost.

    In a round of Sunday morning interviews yesterday, ABC's George Stephanopoulos asked President Obama, who supports the insurance mandate, whether the new proposed penalties amount to a new tax.


    Here's what's happening. You and I are both paying $900 bucks on average — our families — in higher premiums because of uncompensated care. Now, what I've said is that, if you can't afford health insurance, you certainly shouldn't be punished for that. That's just piling on.

    If, on the other hand, we're giving tax credits, we've set up an exchange, you are now part of a big pool, we've driven down the costs, we've done everything we can, and you actually can afford health insurance, but you've just decided, "You know what? I want to take my chances," and then you get hit by a bus, and you and I have to pay for the emergency room care, that's…

    GEORGE STEPHANOPOULOS, anchor, "This Week": That may be, but it's still a tax increase.


    No. That's not true, George. For us to say that you've got to take a responsibility to get health insurance is absolutely not a tax increase. What it's saying is, is that we're not going to have other people carrying your burdens for you any more than the fact that right now everybody in America, just about, has to get auto insurance. Nobody considers that a tax increase.


    But your critics say it is a tax increase.


    My critics say everything is a tax increase. My critics say that I'm taking over every sector of the economy. You know that. Look, we can have a legitimate debate about whether or not we're going to have an individual mandate or not, but…


    But you reject that it's a tax increase?


    I absolutely reject that notion.


    But at least one Democrat sees it differently. In the Max Baucus proposal, the penalty provision is explicitly and repeatedly referred to as an "excise tax."

    So how essential is it to require individuals to purchase insurance, and would that be a tax? For that, we turn to Jonathan Gruber, a health economist at the Massachusetts Institute of Technology. He supported a 2006 Massachusetts health reform law that includes a mandate.

    And Michael Cannon, director of health policy studies at the libertarian Cato Institute.

    All right, let's start with the pros and cons, Jonathan Gruber, of mandating health coverage. What do you think?