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Topics: Obamacare

How to delay Obamacare

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Beltway Confidential,Michael Barone,Taxes,Obamacare,Health Care

From an email correspondent in the Midwest comes a suggestion on how to delay Obamacare:

In the wake of all the Obamacare startup problems, we need another Beardsley Ruml. If we could grant 75% foregiveness of the lesser of one's 1942 or 1943 income tax liability in return for establishing withholding, why not delay Obamacare's individual mandate in exchange for 'working out the bugs'? (Of course, the biblical seven years times seven might be more like it.)

In the early 1940s, Congress vastly increased income tax rates in order to pay for war spending. At that time, there was no income tax withholding: You paid your income tax for, say, 1939, by April 15, 1940. Since before 1940 most people did not pay income tax at all, and since the affluent who did pay income tax could draw interest on the money made in 1939 until April 15, 1940, no one objected much to the system.

However, the vastly stepped up spending for the war meant that the government wanted the cash pronto. Hence income tax withholding. But that meant you had to pay all of your 1942 income tax by April 15, 1943, even while your 1943 cash income was reduced by withholding.

The solution mentioned above was suggested by Beardsley Ruml, the treasurer of Macy's, one of Franklin Roosevelt's many New York acquaintances. It was put into effect and withholding is still with us today. As I understand it, the government gave up some money in return for cash flow.

Could something similar be done with Obamacare? I don't know. But we might want to examine such alternatives if the dire scenario outlined by the indefatigable Megan McArdle comes to pass.

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