President Obama and the definition of taxation

President Obama insists that mandatory health insurance is not a tax, and compares it to automobile insurance.

But now we also know that, under at least the Baucus bill, if you don't purchase health insurance you may be fined $25,000 and sent to prison for a year.

The necessity for this non-taxation is driven by the President's assertion that we all need to become one big health insurance risk pool:

He noted that consumers currently pay higher health insurance premiums due to the costs run up by hospitals and other facilities providing care to uninsured people.

Those unable to afford health insurance should get government help, Obama said, but others who can afford coverage but choose not to get it should face coverage requirements similar to those for auto insurance.

"What it's saying is ... that we're not going to have other people carrying your burdens for you any more than the fact that right now everybody in America, just about, has to get auto insurance," he said. "Nobody considers that a tax increase. People say to themselves, that is a fair way to make sure that, if you hit my car, that I'm not covering all the costs."

This is, of course, not news: it was first reported a week ago, and I have been mulling it over in my slow-moving brain.

It seems to me that taxes, in the modern world, exist to perform two functions for the State. They either raise revenue or modify behavior. Sometimes both. Requiring all Americans to purchase health insurance--explicitly singling out those who choose not to do so as a financial strategy--seems to meet the test of modifying behavior. It will no longer be an option to pay as you go or take your chances.

This move is also fairly obviously targeted as raising revenue, albeit somewhat indirectly, to defer some of the costs associated with universal coverage.

So why not admit it is a tax?

There are political calculations, certainly, and the White House protecting the more-and-more tattered candidate Obama' pledge that no family making less than $250K would see a penny of their taxes raised at all. But I don't think that's it. Everybody knew, back during the campaign, that he didn't mean it. Every analysis by any think tank--right or left--found that Barack Obama's promised new programs would add hundreds of billions to the deficit, and this before the Great Meltdown occurred. Nobody believed him; the people who voted for Obama either knew that he sort of, kind of, had to say that to get elected. After all, remember what happened to Walter Mondale.

But I don't think that's what is happening here.

I really don't think that President Obama believes that mandatory health insurance is a tax. Or that $.01/gallon on sodas is a tax. Or that cap-and-trade involves a tax.

I think that President Obama really believes that if the State's primary intention is to modify the behavior of American citizens for the better--to make them healthier or environmentally friendlier--then what he is proposing is not taxation.

It's influencing or encouraging people to do the right thing, to take responsibility for themselves.

Only if a tax were to be purely about raising revenue, without any pretense of social engineering, would President Obama consider it to be a tax.

There will be a name for this soon. We will actually see some political theorist write a book [and probably score a good position in the administration] delineating the difference between taxes and social responsibility payments. Or maybe it will be called economic democracy credits.

Think I'm nuts?

Then you don't remember George McGovern's Guaranteed Annual Income.