The Federal Government makes you pay a penalty if, among myriad other things, you: don’t have children, don’t get married, and don’t take out a mortgage. Of course, we don’t call these “penalties.” We call them “not getting a tax credit.” Yet some people think that reducing someone’s tax liability if they engage in a particular behavior is different than increasing someone’s tax liability if they don’t engage in that same behavior.
The same people also believe, for incomprehensible reasons, in the existence of a meaningful legal distinction between forcing U.S. citizens to pay the Federal Government money if they fail to purchase a product called a “mortgage” and forcing U.S. citizens to pay the Federal Government money if they fail to purchase one called “health insurance.”
Unfortunately, it seems that such irrational beliefs may also extend to a U.S. Federal judge:
“The individual mandate applies across the board,” Vinson wrote. “People have no choice and there is no way to avoid it. Those who fall under the individual mandate either comply with it, or they are penalized. It is not based on an activity that they make the choice to undertake. Rather, it is based solely on citizenship and on being alive.”
As a social scientists, I can’t help but wonder what drives such obviously flawed reasoning. Is this an example of the psychology of loss aversion, the cognitive blinders created by partisan bias, or something else?
I think it's the belief that there is a qualitative difference between judging policy from a baseline of zero taxes or a baseline of 100% taxes. The mortgage interest deduction allows people to “keep more of their own money”. The health insurance mandate forces them to “keep less of their own money”. Whether this difference is real or a mirage is a philosophical question.
The interest thing is the distributional effects. Both policies harm the lower middle class and help relatively wealthy people, without hurting the poor. If you can't afford to buy a home you have no chance to use the mortgage interest deduction. If you can afford to buy a home (and the associated property taxes), it's likely that you have a good job that also provides you with health insurance. If you're very poor, you likely already qualify for subsidized housing and/or Medicaid. The lower middle class — those who cannot buy homes and don't get insurance from their employers or Medicaid — get screwed.
wkw:
I wouldn't characterize it as a philosophical question, but rather, as you did initially, a psychological one. I suppose the best case one can make is that, in order to be revenue neutral, the hypothetical “tax credit” version would require an equivalent rise in income taxes, but it seems to me that popular credits of the same ilk–particularly the mortgage deduction–are probably already priced into the tax code. I'm also down with your analysis of the distributional impact; in principle, a well-designed subsidy system mitigates against this, but my understanding is that the subsidies in the current legislation are on the low side.
But all of this is kind of beside my point, which concerns the legal status of objections to the so-called “mandate” (i.e., the tax penalty). I simply cannot think of a coherent Constitutional objection that also doesn't invalidate existing deductions and penalties, let alone the mortgage deduction.