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Math problem

Izvestia on the Senate bill:

The penalty for violating this requirement could be as high as 2 percent of a taxpayer’s household income. Penalties would total $15 billion over 10 years, up from $8 billion under Mr. Reid’s original proposal, the Congressional Budget Office said.

In the next 10 years, the government would also collect $28 billion in penalties from employers who did not offer health benefits to employees.

Can anybody reverse engineer non-compliance numbers out of this?

Both for "taxpayers" and for employers?

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CMike's picture
Submitted by CMike on

It's estimated taxpayers would be paying $1.5 billion/year in penalties generated from household incomes totaling $75 billion/year. If the average (not median) household income of those not in compliance is $50,000 (pre-tax?) then the CBO is estimating 1.5 million households will not be in compliance each year. Needless to say I'm making a lot of crude assumptions here and I'm not quite getting the "could be as high as 2%" wording on the penalty.

It's not clear what the penalty rate would be for firms and whether it would be tied to net revenue. And I would have no idea what average net revenue number to use to get an idea of the number of firms not in compliance or the number of those firms' employees.

letsgetitdone's picture
Submitted by letsgetitdone on

The IRS is not the best at enforcement, so if the fine estimate implies that 1.5 million will be in non-compliance then won't the actual non-compliance figure for individuals be more like 15 million?

Also, won't the mandate encourage more taxpayers to refrain from filing tax forms, in order to escape discovery that they've not complied with the mandate. If so, the the mandates might cost more in tax revenue than they get in compliance. What an ironic thought.

CMike's picture
Submitted by CMike on

But a smaller percentage of the population participates in it than used to ten years ago I'd guess. It's hard to function without a bank account these days. Most drug and fencing related activity is still conducted in cash, no doubt, as well as bottom dollar prostitution. Plenty of people working in restaurants and bars are paid off the books. The one underground sector that was seeing growth, at least up until last year I suppose, was the labor market for undocumented workers.

I've not read any thing authoritative on the size of the underground economy for years. This is just my impression of the way things are going. Most people working in the underground economy aren't beating the IRS out of much. The pole dancers are but not the dishwashers. They're working for minimum wage or less. The Freakonomics guys interviewed street level drug dealers a few years back and reported that's what they were making.

Submitted by jawbone on

would have to pay $750 per year for each employee who sought insurance from the health insurance exchange.

Not each employee not covered -- merely those who try to become covered through the exchange.

However, the analyst talking about this thought it was such a small amount that more and more employers would drop coverage. Do the math; it's logical and practical. Would blow up the CBO figures, I think.

Note: I haven't confirmed these figures anywhere else.