We’ll let the Washington Post’s Ezra Klein handle this one:
Here, via the Kaiser Family Foundation, is how the individual mandate works if we call it a tax: “Those without coverage pay a tax penalty of the greater of $695 per year up to a maximum of three times that amount ($2,085) per family or 2.5% of household income…Exemptions will be granted for financial hardship, religious objections, American Indians, those without coverage for less than three months, undocumented immigrants, incarcerated individuals, those for whom the lowest cost plan option exceeds 8% of an individual’s income, and those with incomes below the tax filing threshold.”
And here is how the individual mandate works if we call it a penalty: “Those without coverage pay a tax penalty of the greater of $695 per year up to a maximum of three times that amount ($2,085) per family or 2.5% of household income…Exemptions will be granted for financial hardship, religious objections, American Indians, those without coverage for less than three months, undocumented immigrants, incarcerated individuals, those for whom the lowest cost plan option exceeds 8% of an individual’s income, and those with incomes below the tax filing threshold.”
As you might have noticed, there’s no difference between the description of the mandate in those two paragraphs. That’s not because I’ve made some disastrous copy-and-paste error. It’s because the individual mandate works the exact same way whether you call it a tax or a penalty.
The tax vs. penalty distinction only mattered in determining whether health reform was constitutional. But now that the Supreme Court has settled it, there’s really no reason to care what label is used– the individual mandate works the same no matter what you call it.
