"The Supreme Court looked at what the structure of the law was, and they saw that 1 percent of the people would be paying this charge if they chose not to avail themselves of health insurance. But more middle-class people are going to get a tax cut in this law. There's a tax cut of $4,000 for people who need help paying for health insurance."
White House Chief of Staff Jack Lew on ABC's "This Week," July 1
Republicans have seized on the Supreme Court ruling to blast the Affordable Care Act as a giant tax on the middle class.
President Obama promised during his 2008 campaign not to raise taxes on families making less than $250,000 per year. Whether the president fulfilled that pledge hinges largely on whether the individual-mandate penalty constitutes a tax. (Our colleagues at PolitiFact argue he has already broken that pledge with cigarette taxes and other broad-based taxes.)
Republican challenger Mitt Romney is trying to have it both ways. He implemented a mandate in Massachusetts, but says he never raised taxes. By the same token, he is attacking the president for increasing taxes with the health law.
The Affordable Care Act promises tax credits and cost-sharing subsidies for individuals who earn between 100 and 400 percent of the federal poverty level. The goal is to help people satisfy the individual mandate when they can't afford insurance and don't qualify for Medicaid.
In addition, small businesses will qualify for tax credits if they have no more than 25 employees and average wages of $50,000 per year.
On the other hand, the health law imposes a penalty of $95 or 1 percent of adjusted gross income per adult, whichever is greater, beginning in 2014. The charge jumps to 2 percent or $325 per adult in 2015, and it rises again to 2.5 percent or $695 per adult in 2016.
A report from the nonpartisan Congressional Budget Office shows that an estimated 4 million individuals will pay IRS penalties in 2016 because of the mandate. This represents about 1.2 percent of the population, said projections from the Census Bureau. So Lew is correct with his assertion that only "1 percent of the people would be paying this charge."
How about the notion that more people will receive subsidies than those who incur penalties? Lew is correct there as well. The CBO estimates that 16 million people will receive credits or subsidies to help pay for insurance coverage through the new exchanges in 2016. That's 5 percent of the overall population.
That means about 1.2 percent of the population will pay penalties compared with 5 percent receiving tax credits or subsidies.
It's worth noting that the health law involves more taxes than just a penalty on the uninsured -- if you consider that to be a tax. They include: an excise tax on "Cadillac plans" (plans with especially high premiums); fees on certain manufacturers and insurers; a surtax on investment income for the wealthy; higher Medicare payroll taxes for individuals making more than $200,000 per year; a tax on medical-device manufacturers; and a tax on indoor tanning services.
It's a stretch to say that any of these taxes will affect the middle class, even those that apply to individuals, such as the taxes on "Cadillac plans" and investment income or the higher payroll taxes. But there are a few caveats: many conservatives argue that the increases on businesses will affect hiring, which could affect middle-income people; and "middle class" is a term with no clear definition - nearly everyone thinks they qualify.
The review of the numbers for tax increases versus tax breaks for the middle class show nothing to dispute Lew's statements. The health law, if it works as the nonpartisan government analysts expect, will provide more tax relief than tax burden for middle-income Americans.