In 2012, my youngest child will turn 17 years old. This means that he will no longer be a qualifying child for the Child Tax Credit. This will result in a $1000 increase to my and my wife’s (married joint) AGI on our income taxes. To me, this is similar to the ACA’s insurance mandate.
So, if the insurance mandate is unconstitutional (or merely an unwarranted Federal intrusion into a highly personal decision), is the US Congress mandating that we have another child, even though my wife and I do not wish to do so? For couples with no children at all, are they paying a $1000 fine for each year they remain childless?
I’m being serious here. What makes the ACA insurance mandate different from this Child Tax Credit mandate?
Every year you pay taxes. If you do not have another child, the amount of tax you pay will go up. The government charges different tax rates to people in different circumstances. Charging lower tax rates to those who have dependent children in the home is one example of that.
And the government can’t put you in prison for failing to buy health insurance. In fact I recall that it was clearly stated that those who failed to buy insurance weren’t classified as breaking the law. They just had to pay a penalty. Now if you don’t pay the penalty you can get in trouble, but the same is true if you take the child deduction without having children.
With the income tax, the government has never purported to tax every dime you make. It has always exempted a certain amount from taxation a basic deduction for every person (and in this case a straight credit) for the basic necessities of life. Public policy doesn’t want to tax you on the money you need to survive.
So, with a child in the house, you would need more income to survive than another household without the child, so the government skews your tax bill to reflect this fact. In other words, with that child you have actual expenses that such that $1k (and more) out of your paycheck whereas the childless household would be frittering away that money on vacations, cocaine, and whores which the government (for some reason) think are luxuries that this other household should be paying taxes on.
Other deductions, like for solar panels, mortgage interest, charitable donations and the like are also offsets in income for things that the government designates as good. They already deduct your health insurance premiums if your employer pays them (but for some reason if you pay them, they aren’t deducted).
So, we really don’t have an issue there with deductions for these things. I believe your question is: Why couldn’t the government just give a $1000 “having health insurance” tax credit and how would this be any different from a $1000 “not having health insurance” penalty?
I contend that it is in the nexus of where the money comes from. The deduction for payment of health insurance premiums represents a legitimate, good-faith reduction in disposable income for the necessities of life. Making you pay more for not having it is a punishment unrelated to your income level. A tax for simply having or not having a particular thing is unrelated to the deduction in income required to purchase it and also acts as a punishment instead of a method of collecting a tax.
And I would hope that if, say, the government raised income taxes 10% across the board, but gave a 10% credit or deduction for having health insurance, a court would see through the charade and hold that outside the taxing power, but as a way to circumvent the limitations on government power.
You don’t have to take a tax deduction for your kids. If you want fine, but it’s like charity. I can donate to charity and then not declare it. As long as you pay more rather than less, the IRS is cool with it.
I believe that it is. However, this doesn’t mesh with what income tax deductions do. You have an out of pocket expense for health insurance so the government says, “We feel that such an expenditure is a necessity for you and your family, therefore we consider it not to be taxable income.” That fits in nicely with the overall income tax scheme.
If they say, you didn’t buy health insurance so you owe us $X more, then this isn’t a tax on income, and it bears no relationship to the basis scheme of the income tax system that taxes you on the money you made last year. In fact, your family didn’t get the benefit of health insurance, and you still owe us more money. The fact that the “owe us more money” part is somehow related to the cost of health insurance is irrelevant to taxing income. You never had that income.
To me, there is a huge distinction between the two.
In #1 it is obvious that the landlord is attempting to force you to pay a thousand dollar penalty for no back rubs. A court finds this wrong and strikes it down.
In #2, there is no functional difference. I would hope that a court would look at the facts and see that there really is no rent increase. The rent increase is a charade to get you to give the free back rub or pay $1000 which is the same damned thing that it already said couldn’t be done.
You can be put in prison for not paying the fine. You can’t be put in prison for not accepting the credit. The difference really is that simple; one situation is coercive and one is not. (If one is committing fraud with the child credit, that’s a different situation entirely; I’m comparing non-fraudulent resistance in each situation).
This isn’t a normative argument. I’m not saying that the coercive nature of the mandate is a good or a bad thing, or whether or not it’s constitutional.
My child has done nothing new, yet my tax will go up. He has only gotten a year older. He’s had the nerve to keep on living, darn it, and that is causing me to pay a penalty come income tax time. If I don’t want to pay that penalty, then I must (along with my wife) choose to have another child. That feels awfully coercive to me. His dependency status doesn’t have anything to do with it. In addition to the Child Tax Credit, I get the standard deduction for having a dependent. That offsets some of the cost of having this kid leech off of my hard-earned money. The deduction doesn’t go away in 2012, just the Child Tax Credit. We take deductions for myself and my wife, too.
So, going back to the ACA, wouldn’t it make sense that, if one chooses not to have health insurance, one pay a higher tax to pay for the medical care that you may need. What if the tax said something like, “Buy health insurance that meets certain standards from whatever provider you wish, OR pay a $1000 (for example) penalty at tax time and we’ll cover your medical care.”
Frankly, I’ve never understood the purpose of the Child Tax Credit. I also have never understood why it goes away at 17. It’s not like the kid got any less expensive (in fact, he gets significantly more expensive). Giving this $1000 annual credit doesn’t encourage me to do, or not do, anything. It doesn’t offset any cost of having a kid, and if it did, it should be the standard deduction that happens below the AGI rather than a credit above the AGI. I can see offering a credit for initially having the child. I can see having an even larger credit for adopting a child. Both of those things have a generally beneficial effect on society. Society has a vested interest in encouraging families to adopt, for instance.
[Just to be sure, I do really care for my kids and do not consider them to be a burden. I would have kids regardless of the tax situation.]
At the end of the tax form, isn’t there a statement of some sort that says that everything in the tax return is true and accurate or I will have committed perjury? So, it seems to me that I do have to fill out the form claiming the credit if I do have a qualifying child. However, when I write the check to actually pay the tax, I can write it for whatever amount will clear my bank account, as long as it is equal to or greater than the tax owed.
The “ACA insurance mandate” says, “If you don’t have insurance, you pay a (non-income-tax) penalty” (BTW, fines and penalties are not deductible).
The “Child Tax Credit mandate” says, “If you don’t have another child, your income tax goes up.”
Income tax is specifically constitutional. Fining you for not purchasing something is not (specifically constitutional, that is).
Hmmm…could’ve sworn that I posted this next part already here - anyway, here’s a possible way around it: raise everybody’s - and I mean everybody’s - income tax by $500, but include a $500 “health insurance owner credit”.
You are entitled to your opinion but you don’t seem to give any reason for others to agree with you. You may prefer tax deductions over tax credits but the latter have been accepted as legitimate for a long time now.