So says the Congressional Budget Office, which released a brief report today on the effects of the health reform law. According to the report, about 4 million of the 21 million expected to lack coverage in 2016 will be subject to a tax penalty of $695 or 2.5% of income, whichever is higher. The rest of the 21 million will be exempt from the penalty due to immigration status, financial hardship, religious beliefs and other reasons.
These tax penalties are expected to the net the government about $4 billion per year between 2017 and 2019, according to CBO. About three-quarters of those penalized will earn below $59,000; but more than half of the total amount will be paid by those earning more.
This CBO report will no doubt be used by Republicans to show Obama will “tax” many in the middle class, despite his pledge not to. Indeed, in a statement today, Republican Sen. Chuck Grassley said:
“The President and his supporters in Congress are celebrating the benefits of health reform, but they also have an obligation to acknowledge the other side of the coin. There’s a price for not participating, and people will pay it. The mandate is a tax increase that hits middle-class America the hardest. And these people make less than $250,000 a year, which breaks the President’s pledge not to raise taxes on individuals earning less than $200,000 and families earning less than $250,000 a year.”
The 4 million-person figure will constitute about 1% of the U.S. population. Some might have expected the number of Americans hit by the penalty to be higher, given that the individual mandate penalty in 2016 will be far less than the cost of coverage. But those who pay the penalty will get nothing in return while those who shell out for coverage will get health insurance. In Massachusetts, where the individual mandate penalty is also lower than insurance costs, most residents have made a similar calculation. About 97% of state residents have coverage.