Over the weekend something both interesting and frightening happened. It started when Conservative internet icon Matt Drudge tweeted that he was paying his taxes. Hussein Romney already covered the beginning of all this but since his post we’ve gotten clarity on the issue which I’ll go into after an introduction and followup. Here’s Drudge’s original tweet
Left leaning media outlets Talking Points Memo and the Huffington Post both jumped on this as an example of Drudge lying in order to create controversy, pointing out that there was currently no mechanism within the Federal government to pay an Obamacare penalty (the penalty for not buying insurance, designated a tax by the Supreme Court) and that Drudge shouldn’t have to pay any penalty until next year since individual taxes are paid every year for the prior year. For instance, I’ll be filing my return for 2013’s income, not 2014’s since 2014 isn’t over.
The flaw here was that Drudge is filing as a business (he’s self employed) and pays estimated taxes in advance, quarterly. No employer deducts taxes from the amount of money he pays himself because he is his own employer. Self employed persons are businesses and have to pay estimated taxes in advance. Since Drudge pays himself as a business then he also has to pay an estimate of the Obamacare penalty he’s accruing as a result of declining to purchase health insurance. In what appeared to be an attempt to clarify the issue, Jesse Lee, Director of Progressive Media and Online Response for the White House, responded to Drudge’s tweet.
That should have settled it, right? This man is a White House employee in charge of “online response.” He’s been fielding Obamacare myths and truths as part of his job since he was hired in 2011 and likely before and yet he’s wrong.
The IRS requires self-employed business owners to file annual returns and pay estimated quarterly taxes. When entrepreneurs like Mr. Drudge file their 2014 first quarter taxes, they have to pay the individual health care mandate if they are not getting Obamacare coverage.
The IRS form also allows adding the mandate to the section labeled “other taxes,” hence Mr. Drudge’s chosen name “Liberty tax.”
Drudge is paying his estimated taxes for 2015 as the law requires and somehow no one at TPM or HuffPo or one of the White House’s own spokespersons knows this. Even Yahoo News, in an attempt to find a middle ground on who is right and who is wrong missed the point.
The H&R Block Tax Institute told The Wire that Drudge is likely overpaying his tax debt now and that the overpayment will be deducted once the health insurance penalty is assessed early next year. However, H&R Block also said there is no formal payment calculation yet in place by the IRS for the Individual Shared Responsibility Provision. What’s more, when individuals make estimated tax payments, they cannot specify which government program their payments are going to, i.e. building roads, fighting wars or healthcare. So, if H&R Block is right, Drudge’s literal claim is probably not exactly true, either. At best, he’s overpaying his taxes and assuming that extra money will go to his eventual penalty for not getting health insurance.
Yahoo is hedging, ignoring that there is both a requirement on the part of self employed persons to pay their estimated taxes in advance, which should include an Obamacare penalty if appropriate, as well as an individual provision that puts that penalty requirement off until next year. It’s a massive contradiction and self employed persons don’t want to pay tax penalties for underestimating their tax responsibility. So I reached out directly to Lee on Twitter with a simple question.
Certainly he’s under no obligation to answer me on this but I wasn’t the only one asking. There were and are dozens asking the same thing and he didn’t answer anyone.
Why This Is A Bigger Problem Than An Internet Pissing Contest
The problem here is ultimately not that every left leaning media source that reported on this got it wrong and then refused to admit to doing so. That is certainly a problem, a big one, and is something that people should keep in mind. Partisan media sources are not above bending or obfuscating the truth in order to perpetuate the echo chamber style left/right nature of American political media. Certainly Drudge is not above doing so and clearly it’s more important to some leftist media outlets to call Drudge a liar than it is to educate themselves about the policies (Obamacare) they’re supposed to be informing their readers about.
No, the problem here is that there appears to be no mechanism for self employed persons like Drudge to pay their Obamacare tax penalty in advance as part of their estimated tax responsibility for 2014 and there are contradictory messages about when such a penalty should be paid. That strikes me as a huge problem.
But, instead of addressing what right now appears to be a glaring deficit in Obamacare’s penalty structure you have media outlets trying to score points on surface issues aka “Is Matt Drudge a liar or not.” That’s not the point and ultimately doesn’t matter. What matters is the question of how self employed persons are supposed to pay the Obamacare penalty in the proper way without getting hit with IRS penalties for underestimating their tax responsibility.
There are an estimated 10 million self employed persons in the US and not all of them will be buying insurance. Regardless of the wisdom of that choice, it will be the case. If the IRS hasn’t accounted for this and created a mechanism for advance payment then why not? Why doesn’t the media even seem to care that this mechanism doesn’t exist?
We all understand that politics involves a certain back and forth but in this case there are questions that either the IRS or the White House need to answer. That the media isn’t focusing on those questions but is instead hypnotized by its own internal back and forth is ultimately a betrayal of their core function, informing the public.