A tax or a penalty? Romney, Obama camps debate healthcare ruling

(Reuters) - Republican presidential candidate Mitt Romney took his fight against President Barack Obama's newly upheld healthcare law out on the campaign trail on Friday, attempting to use it to galvanize support for his bid to oust Obama on November 6.

Campaign supporters of Obama sought to blunt Republican criticism that the law will amount to a new tax increase on Americans. A 5-4 majority of U.S. Supreme Court justices ruled the law constitutional on Thursday by saying it falls under Congress' authority to levy taxes.

Romney, at a fundraiser in New York, said the court's decision calls for "greater urgency, I believe, in the election" and that in order to replace Obama's healthcare law "you've got to replace President Obama."

His supporters have responded, pouring nearly $5 million in campaign donations in little more than 24 hours since the ruling was unveiled. Obama's campaign insisted Obama had raised more but did not disclose a number.

Obama's court victory protects his landmark domestic policy achievement but also leaves him open to election-year attacks from Republicans who say the law kills jobs by putting a burden on small businesses.

A ruling by the court that the centerpiece of Obama's law - the "individual mandate" which requires Americans to have health insurance - is in fact a tax, gives Republicans an extra stick with which to hit the Democratic incumbent.

The White House and Obama's campaign argued the court was wrong to label it a tax. Those who refuse the law's mandate to buy health insurance would be required to pay a fine. Only about 1 percent of Americans would likely fall under this category, the administration said.

"So your choice is to purchase health care reform or a penalty will be administered," White House spokesman Jay Carney told reporters aboard Air Force One.

The Supreme Court ruling fell in the midst of a tense period in the presidential campaign with Obama and Romney running closely in opinion polls and trying to define each other as unfit for the White House.

In a sign of the bitterness of the fight, the Romney campaign on Friday issued an ad featuring Secretary of State Hillary Clinton criticizing Obama during the 2008 campaign.

Obama's primary opponent at the time, Clinton accused her fellow Democrat of lying about her record and said "shame on you Barack Obama." The ad is running in the swing states of Ohio, New Hampshire, Nevada, Colorado, North Carolina, Virginia and Iowa.

TAX ISSUE

The Obama campaign accuses Romney of double standards by criticizing the requirement to buy health insurance even though it formed part of the healthcare plan he developed for Massachusetts when he was governor there.

"That was right then, you should ask why he doesn't think it's not right now," Obama senior strategist David Axelrod told NBC's "Today" show.

Romney has offered few specifics on how he would replace the Obama reforms, although he said he would work to retain popular provisions such as blocking insurance companies from forbidding coverage of patients with pre-existing medical conditions.

David Yepsen, director of the Paul Simon Public Policy Institute at Southern Illinois University, said the tax issue may catch fire in the campaign.

"I think that's going to be a fair argument to take to voters. Obama says he's not raising taxes, the Supreme Court says this is a tax. Voters are going to have to decide whether they like this idea," said Yepsen.

The Romney campaign says the law would a have far bigger impact on taxes than just penalizing people who refuse to buy insurance, but instead would raise $500 billion over 10 years.

This charge is based on a March 2011 estimate from the non-partisan Congressional Budget Office, which said the legislation will increase federal revenues in various ways, mostly by increasing the Hospital Insurance payroll tax and imposing fees on certain manufacturers and insurers. Democrats have disputed that.