“Taxing” Implications of the “Affordable Care Act”

Beginning in 2014, under the Patient Protection and Affordable Care Act, individuals must make a “shared responsibility payment” if they do not have minimum essential health insurance for themselves and theirdependents. That penalty (the Supreme Court defined as a “Tax”) will be the greater of: a flat dollar amount per person that rises to $695 in 2016 and is indexed by inflation thereafter (the penalty for children will behalf that amount and an overall cap will apply to family payments); or a percentage of the household’s income that rises to 2.5 percent for 2016 and subsequent years (also subject to a cap). The average penalty paid in 2016 will be $1,200, the CBO reported.

According to the Congressional Budget Office (CBO), 6 million Americans will face a tax penalty for being uninsured in 2016. The 6 million figure in the report, Payments of Penalties for Being Uninsured Under the Affordable Care Act, is a 50 percent increase over a previous projection from the CBO in April 2010. The earlier estimate found that 4 million people would be affected by the tax penalty in 2016, when the penalty fully goes into effect. The CBO now estimates that total collections from the penalty will be about $7 billion in 2016 and average about $8 billion per year over the 2017-2022 period.



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