Obamacare Lives: Every Penalty a Tax?

About Steve Klein

serves as Staff Attorney and Research Counsel for the Wyoming Liberty Group.

Much to the surprise of many—not least President Obama—Obamacare’s individual mandate to purchase health insurance is a tax under Article I, § 8, cl. 1 of the Constitution. 

I know what you’re thinking: why did President Obama raise taxes during a recession?  More on that in a moment.

Having had the chance to go through most of the opinion in NFIB v. Sebelius today (which is hard to do between all the commentary pouring in and trying to calm down from righteous indignation), I have a few thoughts on the individual mandate.  Today I will focus on that part of majority opinion and perhaps cover the dissent and Medicaid ruling tomorrow, both of which I hear are more favorable. All citations below are to the slip opinion.

I was initially angry with Chief Justice Roberts.  Many people are still angry.  I disagree with him on the mandate, but keep in mind that Roberts didn’t come to this conclusion easily—the introduction to his majority opinion should serve as ample evidence.  Alas, that does not change the fact that this opinion is a devastating blow to individual liberty.  

Chief Justice Roberts on the Commerce Power (AKA the good news):

  • “The language of the Constitution reflects the natural understanding that the power to regulate assumes there is already something to be regulated.” (Pg. 19)
  • “The farmer in Wickard was at least actively engaged in the production of wheat, and the Government could regulate that activity because of its effect on commerce.  The Government’s theory here would effectively override that limitation, by establishing that individuals may be regulated under the Commerce Clause whenever enough of them are not doing something the Government would have them do.” (Pg. 22)
  • The Necessary and Proper Clause does not save the mandate under the commerce power: “Even if the individual mandate is ‘necessary’ to the Act’s insurance reforms, such an expansion of federal power is not a ‘proper’ means for making those reforms effective.” (Pg. 30)

This part of Roberts’s opinion largely agrees with the dissent, making it a 5-4 ruling and placing an outer limit on the Commerce power.  This goes squarely against the reasoning that many pundits and law professors used to justify the mandate.  It’s a victory, but very hard to see when the individual mandate survives on other grounds.  As Randy Barnett, one of the architects of this lawsuit, opens his reaction: “Who would have thought we could win while losing?”

The Majority on the Taxing Power (AKA the bad news):

  • The ruling basically analyzes the mandate under previous cases and rules that it can be considered a tax because (1) the penalty is lower than cost of insurance, (2) there no scienter requirement (e.g., one does not have to have to “knowingly” not purchase insurance to be subject to the tax), and (3) payment is collected by the IRS through normal means of taxation without possibility of criminal sanctions. (Pgs. 35–36)
  • “While the individual mandate clearly aims to induce the purchase of health insurance, it need not be read to declare that failing to do so is unlawful.  Neither the Act nor any other law attaches negative legal consequences to not buying health insurance, beyond requiring a payment to the IRS.” (Pg. 37)
  • “We do not make light of the severe burden that taxation–especially taxation motivated by a regulatory purpose–can impose. But imposition of a tax nonetheless leaves an individual with a lawful choice to do or not to do a certain act, so long as he is willing to pay a tax levied on that choice.” (Pgs. 43-44)

What to make of all this?  It’s tough.  To be frank, it’s ridiculous outside of the legal realm and I can understand the anger and frustration.  I wonder if that pledge by members of Congress to cite the Constitutional authority for proposed laws should be enacted into law itself and enhanced with a “no end-run” provision: if the proponents won’t say it’s a tax, then the courts can’t save the law as a tax, or anything aside from the cited authority.

It’s worth noting that the limit on the Commerce power could keep things honest: politicians will no longer be able to pass mandates like this under any other name but a tax.  As we all know, Obama and the supporters of the ACA did everything to avoid calling this a tax, because they knew the political consequences (which they endured anyway).  But that seems like a small victory, since Congress can now officially force us into action with penalties under the name of a tax.  Penalties, or taxes, for not eating our broccoli, not buying Chevy Volts… just because it might be more politically difficult to pass the legislation doesn’t mean it’s not constitutionally abhorrent that Congress wields such power.  

Check out the ongoing online symposium at SCOTUSblog.

I will be on the Morning Zone on KGAB (AM 650) with Dave Chaffin tomorrow morning at 7:00 a.m. Mountain Time to discuss the ruling. Tune in or listen live.

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