Civitas Review

How Obamacare Ruling May Roil NC


The latest chaos associated with Obamacare could have an impact on North Carolina.

A ruling yesterday by a federal court was a major jolt to the health care law. A D.C. Circuit Court of Appeals panel wrote that the Affordable Care Act (ACA) does not allow the IRS to pay subsidies to enrollees in federal exchanges. In a 2-to-1 decision, the judges said that “the ACA unambiguously restricts the section 36B subsidy to insurance purchased on Exchanges 'established by the State.'”

Thirty-four states, including North Carolina, declined to open their own exchanges. The actual text of the law, as cited above, says subsidies to poor people can go only to people who sign up on exchanges “established by the State.” If the law stands and NC refuses to open its own exchange  — more on that below — people in North Carolina would not be eligible for Obamacare subsidies.

A separate federal court concluded that the actual words of the law can be ignored, and the Obama administration has appealed the D.C. Circuit’s three-judge panel ruling to the full appeals court. All this may well send the case to the Supreme Court. For now, the Obama administration has decreed the subsidies can continue.

In the mean time, chaos reigns. More than four out of five ACA enrollees qualify for subsidies. It seems plain that if people can’t get subsidies from the state exchanges many will drop their ACA coverage. That would cripple ACA finances, and presumably undercut political support as well.

What happens next? Conservatives should be wary. For one thing, this legal mess could put more pressure on Gov. Pat McCrory and the NC General Assembly to establish a state-run exchange. As explained in this article, previously states could resist setting up exchanges, but citizens of the state could still get federal subsidies. But if the courts affirm that subsidies can go only to people in state-run exchanges, you can bet that liberals, Democrats, newspaper editorial boards, and medical-industry lobbyists will be howling for North Carolina to establish an exchange to ladle out those subsidies.

Meanwhile, another hit to Obamacare will hearten conservatives who believe it will hammer our health care and the state’s finances, not to mention our freedoms. The ACA is based on a bad idea whose execution was botched in every conceivable way, and a few that were inconceivable before the law was passed. That will make it even more important for North Carolina to hold out as a bulwark against this damaging law.

Senate Finance Committee Approves Local Tax Changes, Expansion of Corporate Welfare


The Senate Finance Committee gave approval to a bill that impacts local sales taxes and expands state government's corporate welfare programs. The bill is on the schedule for Senate discussion today.

HB 1224 has been modified over the past week, with the final version gaining committee approval yesterday. With regard to local sales taxes, the bill would:

  • Allow local governments to raise their sales taxes in 1/4 cent increments, pending voter approval, and allow the revenue to be used for purposes voters approve
  • Cap the local sales tax rate at 2.5% (most counties currently levy a 2% local sales tax; which combined with the state rate of 4.75% brings the total to 6.75%)
  • Notable exceptions are Durham and Orange counties, currently with local rates of 2.75%. They would be allowed to keep that rate under this bill
  • Mecklenburg currently has a 2.5% local sales tax, this bill would not allow any further tax hikes
  • Wake Co. is expected to ask voters to approve a 1/4 cent sales tax increase this fall. If that passes, they would not be able to ask for another 1/2 cent sales tax increase for transit in the future, as that would put them over the 2.5 cent cap proposed in HB 1224

Receiving little attention is the part of the bill that expands the state government's corporate welfare programs. The currently existing JMAC (Jobs Maintenance and Capital Development Fund) and JDIG (Job Development Investment Grant) programs would be expanded; and a new "Job Catalyst Fund" that would be similar in nature would also be created (without any specific dollar amount mentioned in the bill). These programs are corporate welfare schemes that distribute taxpayer dollars to politically-privileged companies.

Lastly, the final bill also added a provision authorizing North Carolina-based companies to engage in "crowdfunding," i.e. selling shares in a company not registered under state or federal law via the web.

DC Court of Appeals Rules Against Obamacare


A ruling today states that the provision in Obamacare that says those enrolling in health insurance exchanges "established by the State" are not eligible for government subsidies to help pay for premiums. The court ruling is in contrast to a previous rule created by the IRS that attempted to reverse this very specific provision.


A federal court on Tuesday struck down a rule from the Internal Revenue Service making Americans in federally run health insurance marketplaces eligible for subsidies, a decision that could seriously imperil implementation of the Affordable Care Act….

Lawmakers drafted the Affordable Care Act so that if a state did not set up a health insurance marketplace – known as “exchanges” – the federal government would do so in its stead. But shortly after the first major challenge to the law’s insurance mandate failed, opponents of the law began arguing that Americans participating in the federally run exchanges were ineligible for subsidies meant to help working and middle class Americans purchase health insurance. Thirty-six mostly Republican run states have opted not to build exchanges.

“If the D.C. Circuit’s opinion stands, it will be a devastating blow to Obamacare. It would cripple the law in the 36 states with federal exchanges,” said Adam Winkler, a law professor at UCLA.

Cato Institute's Michael Cannon has an excellent overview of the case here, including the notion that those states that did not establish an exchange not only would not be eligible for subsidies, their citizens would not be subject to the taxes levied on those not complying with the individual mandate.

This ruling shows why it was so important for NC to refuse to set up an exchange, and if it stands will serve a crippling blow to Obamacare.

The Obama administration will appeal the decision.

Obamacare Mandate to Cost NC Taxpayers Millions for State Employee Coverage


Thousands of state employees will be newly eligible for mandated health insurance coverage this January, courtesy of Obamacare. This has presented an additional challenge to state budget writers of how to pay for their coverage.

The issue has been a concern for months, as state agencies must absorb the cost of covering temporary employees who work 30 or more hours a week. The category could include as many as 24,000 employees statewide, though that number may be reduced significantly once state agencies determine their personnel needs and workers' eligibility under federal guidelines.UNC estimates 8,600 work in the university system.

The Senate budget allows the UNC system to go it alone and put out bids for its own plan for these workers, which include graduate student teaching assistants, postdoctoral fellows, student workers, library employees and others. The House budget requires that all employees in the category statewide be covered under a new option in the State Health Plan.

The decision has put UNC at odds with the State Health Plan and the State Employees Association of North Carolina, which have both opposed the university system's authority to carve out a segment of their workers for a separate plan.


Early on, UNC Board of Governors members feared that the new federal requirement would cost the university system $47 million — based on the State Health Plan's$5,500 annual cost for other state employees.

The $47 million cost may be roughly cut in half depending if the UNC system decides to enroll their newly eligible employees in the State Health Plan or a separate plan.

Senate Bill Allows Local Sales Tax Hike for Ed Expands Corporate Welfare


In a new "committee substitute" bill introduced by the Senate Finance Committee yesterday, the state would authorize local governments to raise their sales taxes by 1/2 cent to fund education (but create a cap on the local tax rate), and a new corporate welfare program would be created. A summary on the local sales tax provision from WRAL:

The legislation, unveiled as a Senate substitute in the Senate Finance Committee on Wednesday, would allow counties to raise sales taxes by a half-cent, rather than a quarter-cent, to pay for education funding. It would cap the local rate at a maximum of 2.5 percent, which, when added to the current state sales tax of 4.75 percent, would mean a maximum sales tax of 7.25 percent in any county.

Counties would still need to obtain voter approval for any increase.

However, the proposal require counties seeking an increase to raise their local rate all the way to 2.5 percent, disallowing counties currently at 2 percent from seeking a smaller quarter-cent increase. It would also require counties to use all new revenue generated by a hike for either education needs or transportation needs but not both.

Counties would not be allowed to have a quarter-cent sales tax for transportation and another quarter-cent for schools. If they have or institute a sales surtax for schools, they would have to repeal it or allow it to expire before going to voters for a new increase for transportation needs.

That change would most immediately affect Mecklenburg County, where commissioners are backing a quarter-cent sales tax increase on the ballot this fall. The money would mostly go to supplement teacher salaries. But the county would have to scuttle that plan, since it has already enacted a half-cent transit tax, bringing it to the cap of 2.5 percent.

It could also affect Wake County, where Democratic commissioners have proposed a quarter-cent sales tax increase to pay for teacher raises. The county Board of Commissioners is expected to vote Aug. 4 on whether to put the referendum on the ballot in November.

Also included in the bill is an expansion of the state's corporate welfare efforts. It creates a new "Job Catalyst Fund" which, similar to other already existing funds, would award taxpayer dollars to select businesses meeting certain "job creation" requirements. Unfortunately, there is no provision to track whether the workers hired by these new firms are actually coming from the ranks of the unemployed and thus creating new jobs, or merely being hired away from their current jobs in which case there wouldn't be "new" jobs being created but just a shift in the mix of jobs toward the politically-privileged company. And there is also no way to determine the loss of jobs and investment suffered by those businesses being placed at a competitive disadvantage, or the jobs never created because tax rates remain higher than they otherwise would be without the corporate welfare programs.

Moreover, the bill would expand the eligibility for the JMAC (Job Maintenance and Capital Development) fund, and also increase funding for the JDIG (Job Development Investment Grant) fund. Both of these programs are corporate welfare schemes that have been in place for several years.