Mandates are Taxes

Perhaps the reasoning that ‘mandate are taxes’ in Judge Robert’s decision for Obamacare will make it more accepted that taxes are a radical understatement for the size of government. Clearly, it is easier to proxy the size of government with things like number of employees, or total revenue or spending, but that doesn’t mean this is a sufficient statistic, just an easy one.

A friend of mine is a CFO for a large company, and says they are not expanding into California because of the excessive amount of regulations in that state, making the total cost of development much higher than any simple metric of property values or wages. Currently the Equal Employment Opportunity Commission mandates that things like disparate impact among historically disadvantaged minorities, using criminal records in employment, or firing alcoholics, can be illegal. Home Depot’s founder says that he could never have built up his company today with all the environmental and employment regulations. And then there’s the Hoover Dam, which many like to show what government can do, but now could never be built because of current regulations.

Obama was pretty adamant that a mandate is not a tax, and this was a common argument. Now that this bill was salvaged via the argument that mandates are a tax, I at least hope there’s a concession that a mandate is a tax.  Cliff Asness has an article on this point, presciently written days before the decision.

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About Eric Falkenstein 136 Articles

Eric Falkenstein is an economist who specializes in quantitative issues in finance: risk management, long/short equity investing, default modeling, etc.

Eric received his Ph.D. in Economics from Northwestern University , 1994 and his B.A. in Economics from Washington University in St. Louis, 1987

He is the author of the 2009 book Finding Alpha.

Visit: Eric Falkenstein's Website

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