Tax confusion dogs politics of health care and gasoline

July 9, 2012
The oil and gas industry can relate to confusion over what constitutes a tax, which figured prominently in the historic June 28 decision by the US Supreme Court upholding health-care reform.

The oil and gas industry can relate to confusion over what constitutes a tax, which figured prominently in the historic June 28 decision by the US Supreme Court upholding health-care reform.

The court ruled Congress can make people buy health insurance by virtue not of its constitutional authority to regulate commerce, as had been argued, but rather of its power to tax.

So the Affordable Care Act, also known as Obamacare, stands. And it turns out to have been a new tax—an identity Congress was loath to sanction when it passed the federal government's blitz of medicine in 2010.

Well, it's a tax now. The Supreme Court says so. Lawmakers who supported the then-not-a-tax health bill and survived the midyear-election purge that followed have some explaining to do between now and November.

To be fair, this isn't the only episode of confusion over what is and what is not a tax.

To liken elevation in the price of gasoline to taxation, for example, has become popular. President Obama did so on Apr. 17. "When gas prices go up," he said, "it's like an additional tax that comes right out of your pocket."

If a price increase for gasoline is like a tax, so must be a price increase for bread or bananas. Prices of those goods sometimes rise. If an increase in the price of gasoline is like a tax, increases in prices of bread and bananas must be like taxes, too.

And if a gasoline price increase is like a tax, a gasoline price decrease must be like a tax cut.

Gasoline prices are plummeting. If the analogy is sound, a tax cut is in progress. Why aren't Obama and fellow Democrats looking for ways to confine the benefits to households with incomes below $200,000/year?

Of course, a fundamental distinction makes the gasoline price-tax analogy wholly unsound.

Markets raise prices. Congress raises taxes.

Sometimes it takes a Supreme Court decision to sort out who deserves blame for what.

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