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CBO predicts many will be excused from ACA tax penalty


By Virgil Dickson
Posted: June 5, 2014 - 7:15 pm ET
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The Congressional Budget Office expects many people will get a pass from the tax penalty that will be levied on individuals who do not have health insurance, according to a new report.

The Patient Protection and Affordable Care Act mandates that consumers have coverage or face a penalty that will either come in the form of a flat dollar amount that will rise from $95 in 2014 to $695 in 2016, or a percentage of a household's adjusted gross income, which will rise from 1% to 2.5% in the next two years.

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For fiscal years 2015 to 2024, the CBO and the staff of the Joint Committee on Taxation (JCT) estimate that such payments will total $46 billion with about 30 million nonelderly residents being uninsured in 2016.

However, many of these individuals will likely be exempt from the penalty for numerous reasons, including that they may be unauthorized immigrants, people with income low enough that they are not required to file an income tax return, or individuals who are incarcerated or are members of Indian tribes, the report notes.

The CBO and JCT estimate that 23 million uninsured people in 2016 will qualify for one or more of these and other exemptions. Of the remaining 7 million uninsured people, the agencies believe that some will be granted a pass because of hardship or for other reasons.

All told, roughly 4 million people will end up paying a penalty, resulting in fine revenue of $4 billion in 2016 and an average of $5 billion a year between 2017 and 2024.

This estimate differs from one the agencies released in 2012. In that report, 6 million people were expected to be on the hook for the penalty for being uninsured in 2016. As a result of this change in expectations, collections are now likely to be about $3 billion less for that year.

The decrease largely stems from an increase in the CBO and JCT’s projection of the number of people who will be exempt from the penalty. That upsurge is occurring, in part, because of regulations issued since September 2012 by HHS and the Treasury Department.

Follow Virgil Dickson on Twitter: @MHvdickson


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