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Health Care’s New Rules: If You Don’t Buy Insurance, Will You Really Pay the Tax?

Now that the Supreme Court has decided that ObamaCare’s mandate to buy health insurance is a tax, will the IRS be able to collect it?

Generally speaking, if you owe the IRS, it will get the money from you—with the possible exception of the ObamaCare tax. Though ObamaCare’s individual mandate imposes a tax on people who do not purchase government-approved health insurance, the law explicitly neuters the IRS’s ability to collect the tax.

Bizarre? Yes. And it matters. If policymakers expect uninsured young people to buy health insurance when it is even more expensive than it is today, the threat of serious consequences for not doing so must be real. Yes, the threat that the IRS might come after you if you do not do what you are told looks real at first glance. But Democratic politicians, fearing public backlash for making the mandate too intrusive, pulled its teeth.

First, the tax (nee penalty) is too small to matter to the people who are its target. In 2014, the tax will be the larger of $95 or 1 percent of taxable income for an individual. By 2016 it rises to $695 or 2.5 percent of income. Young people would not want to pay a dollar if they could avoid it, but avoiding the tax means signing up for insurance that many do not think they need. That insurance is not free. Even with subsidies, they will pay at least 3 percent of their incomes for premiums and up to 6 percent of the cost of the insurance in deductibles and copayments. That adds up to a lot more than 95 bucks.

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