Will 11 Million Pay Obamacare Mandate Penalty?

I recently took issue with lack of clarity in media coverage of a report by the IRS’ Taxpayer Advocate, which claimed 6.6 million paid Obamacare’s individual mandate penalty last year. I figured the total must be significantly higher, because each tax return would cover more than one individual.

In an e-mail to me dated July 21, 2015, Doug Badger, a longtime veteran of Republican administrations and whose Doug’s Briefcase blog is a must-read, pointed out that there can be more than one person in a household applying for Obamacare coverage:

….. a more accurate measure of household size could be obtained by dividing the number of people included in a completed applications by the number of applications.  That yields a factor of around 1.35, as opposed to 2.35.  I admit that is a rough approximation and there may be better ways of calculating the number of people affected by the tax on the uninsured.  In any event, your central point is exactly right: the number of people living in households that paid the tax is much greater than 6.6 million.

This brings us a little closer to reconciling the IRS report with the U.S. Department of Health & Human Services’. (Although, in that case, the U.S. Department of Health & Human Services does not appear to have consistency used the word “individual” accurately in its reports.)

Last Friday, another officer of the U.S. Treasury issued a different estimate: 7.5 million “taxpayers” (again, it is unclear whether a taxpayer is an individual or a household) paid Obamacare’s individual mandate penalty. The report also notes that only 135 million of 150 million estimated 2014 tax returns have been submitted and processed. That suggest the 8.3 million “taxpayers” will have to pay Obamacare’s individual mandate penalty when all is said and done.

The report anticipates 4.8 million “taxpayers” will have to claim or reconcile Obamacare’s premium tax credits. As discussed in the previous blog entry, this should represent around 6.14 million individuals, or 1.28 individuals per tax return (and broadly in line with Mr. Badger’s estimate.
However, the report also suggests that one half of those who claimed Obamacare premium, tax credits received too much money, and have or will have to pay it back. That would be 2.4 million returns representing about 3 million people.

Also, if we assume there are also 1.28 individuals per tax return among those liable for 2014 Obamacare individual mandate penalties, that turns 8.3 million “taxpayers” into just under 11 million individuals.