FACT CHECK: Individual Mandate Penalty Falls Heaviest On Families Making $50K Or Less

David Sivak | Fact Check Editor

Republican Senator Bill Cassidy claimed Wednesday on CNN that middle and lower-income families pay the majority of individual mandate penalties under Obamacare.

“Fifty-eight percent of those penalties are paid by families which make $50,000 or less,” said Cassidy.

Verdict: True

Tax filers with an adjusted gross income (AGI) under $50,000 paid 58 percent of the $3.1 billion in penalties collected by the IRS in 2015, the most recent tax year for which data was available.

Fact Check:

The individual mandate requires non-exempt Americans without health insurance to purchase a health plan or face a penalty. Today, the penalty can cost families up to $2,085 a year or 2.5 percent of applicable income above a certain threshold, whichever is higher.

The IRS collected $3.1 billion from 6.7 million taxpayers in 2015, and according to IRS data tables, $1.8 billion – or 58 percent – were collected from taxpayers with an AGI of less than $50,000. AGI is taxable income minus specific deductions like retirement plan contributions.

By and large, the IRS collects individual mandate payments from lower- and middle-income taxpayers. Twenty-two percent of penalties were paid by tax filers with an AGI under $25,000 and 86 percent were paid by those with an AGI under $100,000.

The Daily Caller News Foundation also looked at the income distribution of the 6.7 million tax filers who paid the penalty and found that 79 percent had an AGI under $50,000.

Nearly all of these taxpayers had an AGI under $100,000.

Wealthier taxpayers did pay a proportionally larger share of the penalty. Only four percent of the 6.7 million tax filers had an AGI greater than $100,000, but they paid 14 percent of the $3.1 billion in penalties.

All of these calculations deal with AGI as opposed to gross income, which Cassidy could have clarified in his interview. Barring this caveat, however, Cassidy’s claim is true.

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David Sivak

Fact Check Editor
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