The Obamacare Ruling: From Death and Taxes to Death and Penalties
“See Letter from Benjamin Franklin to M. Le Roy (Nov. 13, 1789) (“Our new Constitution is now established . . . but in this world nothing can be said to be certain,except death and taxes”).”
- National Federation of Independent Business v. Sebelius, pg 42, June 28, 2012.
As most already know the basics of the today’s Supreme Court ruling (mandate yay, Medicaid nay), I’d rather focus on the objection to being “compelled” to purchase a product, an objection many people hold as there is no obvious precedent where the government has forced someone to buy something by virtue of existing.
Particularly interesting is the passage on pgs. 40-44 of the Court’s opinion (PDF). After briefly discussing what “direct taxes” and “capitations” are (a capitation is a tax levied by head count solely by existing), Justice Roberts remarks:
“A tax on going without health insurance does not fall within any recognized category of direct tax. It is not a capitation. Capitations are taxes paid by every person, “without regard to property, profession, or any other circumstance.” Hylton, supra, at 175 (opinion of Chase, J.) (emphasis altered). The whole point of the shared responsibility payment is that it is triggered by specific circumstances—earning a certain amount of income but not obtaining health insurance. The payment is also plainly not a tax on the ownership of land or personal property. The shared responsibility payment is thus not a direct … “
To the objection that government should not punish inaction:
“Even if only a tax, the payment under §5000A(b) remains a burden that the Federal Government imposes for an omission, not an act. If it is troubling to interpret the Commerce Clause as authorizing Congress to regulate those who abstain from commerce, perhaps it should be similarly troubling to permit Congress to impose a tax for not doing something. “
However, Roberts goes on to explain:
“Three considerations allay this concern. First, and most importantly, it is abundantly clear the Constitution does not guarantee that individuals may avoid taxation through inactivity….capitations are expressly contemplated by the Constitution. The Court today holds that our Constitution protects us from federal regulation under the Commerce Clause so long as we abstain from the regulated activity. But from its creation, the Constitution has made no such promise with respect to taxes.”
“Congress’s use of the Taxing Clause to encourage buying something is, by contrast, not new. Tax incentives already promote ,for example, purchasing homes and professional educations. See 26 U. S. C. §§163(h), 25A. Sustaining the mandate as a tax depends only on whether Congress has properly exercised its taxing power to encourage purchasing health insurance, not whether it can. Upholding the individual mandate under the Taxing Clause thus does not recognize any new federal power. It determines that Congress has used an existing one.”
But that example relates to a tax credit that rewards people for purchasing something. What if people are “penalized” or “fined” instead of “not rewarded” for not purchasing something? Good question, but Roberts argued that it’s irrelevant, as the the tax for not purchasing insurance is not a fine:
“Once we recognize that Congress may regulate a particular decision under the Commerce Clause, the Federal Government can bring its full weight to bear. Congress may simply command individuals to do as it directs. An individual who disobeys may be subjected to criminal sanctions. Those sanctions can include not only fines and imprisonment, but all the attendant consequences of being branded a criminal…
By contrast, Congress’s authority under the taxing power is limited to requiring an individual to pay money into the Federal Treasury, no more. If a tax is properly paid, the Government has no power to compel or punish individuals subject to it. 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 do a certain act, so long as he is willing to pay a tax levied on that choice.”
What Roberts is arguing is that since no one who refuses to buy insurance will be a criminal, the government is not compelling anyone to do anything. A person doesn’t buy an electric car will not get a tax credit and will pay more in taxes (all else equal) than someone who did. That doesn’t mean that the government is requiring the person to buy an electric car nor is that person’s inaction a crime. Just as the only outcome of not buying an electric car is the inability to claim a tax credit (resulting in higher taxes), the outcome of not purchasing insurance is a tax (resulting in higher taxes). You will not get thrown in jail for not purchasing insurance or an electric car. The choice is still yours.
It is a technicality, but it is within the scope of the court to seek out such technicalities:
“In pressing its taxing power argument, the Government asks the Court to view the mandate as imposing a tax on those who do not buy that product. Because ‘every reasonable construction must be resorted to, in order tosave a statute from unconstitutionality,’ Hooper v. California, 155 U. S. 648, 657…” – pg 3
So what does that mean? It means the mandate is not technically a mandate at all. It also means that Congress and the President were either too stupid to realize or were flat out lying when they said that the charge for not purchasing insurance was a tax (Sep 2009 – Obama: It’s not a tax)
But on the other hand…
The dissenting justices of the Court wholly disagreed with this assessment. They argued that there is no precedent in this context for the reinterpretation of the penalty as a tax and that the language in the Act clearly indicates that the mandate was a “requirement” (using the language of the Act. In one example, they note that the law addresses three groups of Americans: those who are exempt from the mandate (e.g. religious grounds), those who are subject to the mandate but exempt from the penalty (e.g. low or no income), and those who are subject to both the mandate and the penalty. If the spirit of the mandate is indeed a tax, why divide those exempt from the mandate into two groups?
“In a few cases, this Court has held that a ‘tax’ imposed upon private conduct was so onerous as to be in effect a penalty, but we have never held, never, that a penalty imposed for violation of the law was so trivial as to be in effect a tax. We have never held that any exaction imposed for violation of the law is an exercise of Congress’ taxing power — even when the statute calls it a tax, much less when (as here) the statute repeatedly calls it a penalty.” – pg. 18 of the dissent
The dissenting justices also launched arguments based on 10th Amendment grounds (delegating powers to the states), saying that the Act is an overreach of Federal power. That treads in a little political water, but it’s an entirely valid concern.
It all goes to the voters
Whether or not Supreme Court is right in its ruling, it is the final word as far as the courts are concerned. Ultimately, this means that the voters in a very indirect way will have the last say through the democratic process by selecting candidates who either support or oppose the law.