A Tax By Any Other Name

-Submitted by David Drumm (Nal), Guest Blogger

Jack M. Balkin

Jack M. Balkin, Knight Professor of Constitutional Law and the First Amendment at Yale Law School, has a different perspective on the constitutionality of the Affordable Care Act. Professor Balkin argues that the individual mandate is a tax and the Constitution gives Congress the power to tax and spend money to promote the general welfare.

This necessarily and properly avoids the Commerce Clause.

While Congress and President Obama may not want to use the word “tax” for political purposes, for constitutional purposes, the Supreme Court has held that if a law raises revenues, it’s a tax. Americans have a choice, buy health insurance or pay a tax. The IRS has been charged with collection of the tax.

Like any tax law, this one has loopholes exemptions. People are exempt from paying the tax if they have health insurance through their employers, are on Medicare, are poor, are dependents, are in the military, live overseas, or it they have religious objections. The tax promotes the general welfare by making health services available and affordable.

Nor is the individual mandate a “direct tax“, such as property tax, or a capitation (“head tax”). The individual mandate is not a tax on the general population but only on those who don’t buy insurance and are otherwise not exempt. The individual mandate is a tax on behavior.

An interactive assessment of Judge Vinson’s decision can be found here.

H/T: NY Times, Amicus Curiae (Virginia v. Sebelius) (pdf).

57 thoughts on “A Tax By Any Other Name”

  1. Bob,Esq.,
    I do want to address your question askng “How is it that these citizens who were driven into bankruptcy and lost nearly everything must now account for this imaginary benefit of the public picking up their tab?” You are correct that unpaid medical bills are one of the leading causes of bankruptcy, along with divorce. However, you are missing that a large percentage of those medical bankruptcies involved people who had medical insurance. This study actually had the number at 3/4 of the medical bankruptcies involved people with insurance. http://articles.cnn.com/2009-06-05/health/bankruptcy.medical.bills_1_medical-bills-bankruptcies-health-insurance?_s=PM:HEALTH Without the Affordable Care Act to remove preexisting conditions and lifetime caps, the bankruptcies are likely to continue,aren’t they?
    The people Tribe is referring to, as I understand it at least, are ones who don’t buy insurance and go to emergency rooms for their care.

  2. Nal: “The monies are collected via the tax system.”

    So now you’re just going to ignore the exercise of power to force people to buy insurance from insurance carriers in their state so as to subsidize privately owned risk pools?

    Now, had we passed legislation creating a single payer system, and the monies were collected on an equally apportioned basis per capita, then we’d have no problem would we?

    But since you’re arguing for the exercise of power beyond that which was ever granted to the Fed, we do have a problem; don’t we?

  3. Vince: “The health care legislation does not regulate or tax anyone’s right to live and breath.”

    I said that exercising one’s right to live and breathe cannot be re-defined as a form of commerce simply to suit a particular agenda. If the only condition precedent to invoke the commerce clause now is simple living and breathing, where did our government of limited powers go?

    I’m not a suckup, but I need to say it:

    Jonathan Turley is ‘dead on balls accurate’ on this issue.

    Vince: “To the contrary, it regulates commerce among the States and imposes taxes on that commerce.”

    That’s two different things Vince; you’re blurring the two and it’s indicative of the quality of thinking being applied.

    People are rushing into this argument without seriously considering the veracity or implications of their premises.

    From Tribe: “Individuals who don’t purchase insurance they can afford have made a choice to take a free ride on the health care system. They know that if they need emergency-room care that they can’t pay for, the public will pick up the tab. This conscious choice carries serious economic consequences for the national health care market, which makes it a proper subject for federal regulation.”

    If the public picks up the tab, then why are unpaid medical bills the leading cause of personal bankruptcy? How is it that these citizens who were driven into bankruptcy and lost nearly everything must now account for this imaginary benefit of the public picking up their tab? How were they freeloading?

    And almost as an afterthought, what about the Equal Protection problem caused by different state regulations causing different costs for health insurance across the country?

    I’d never seen the ugly idiotic side of liberalism till this issue showed up. I honestly thought right wingers had the monopoly; I was wrong.

  4. Vince,

    Excellent article from Professor Tribe.

    Bob, Esq.,

    The monies are collected via the tax system. Some taxpayers, those who already have health insurance, are exempt via a tax loophole.

  5. The health care legislation does not regulate or tax anyone’s right to live and breath. To the contrary, it regulates commerce among the States and imposes taxes on that commerce. The law is necessary and proper to maintain the financial soundness of the health care system.

    As Charles Fried said, the U.S. Supreme Court has held that insurance is commerce, and the business of health insurance is commerce: “And if health insurance is commerce, then the health care mandate is a regulation of commerce, explicitly authorized by Article I, Section 8 of the Constitution.”

    Charles Fried IS and expert on the Constitution. He argued before the Supreme Court as Solicitor General in the Reagan administration, so he is a conservative, not a liberal, and is not a political partisan of the new law. He served as a Justice of the Massachusetts Supreme Judicial Court, has written books and articles, and taught for many years. It is interesting that his view comport with those of the liberal Larry Tribe.

    The pros and cons of the issues the taxing power and the commerce power, as well as the constitutional limits on congressional authority, were thoroughly canvassed in the Congressional Research Service Report for the Congress a year ago, http://www.ncsl.org/documents/health/Constitutionality.pdf

    The Tribe-Fried combination makes a very strong statement of the constitutional authority for the new law.

  6. Glad to be on Prof. Tribe’s side again. Hope he is correct, and “justice will prevail”.

  7. Nal,

    All you’ve done is bolster why my argument that the monies must be collected through the general tax rolls is correct.

    Vince,

    Simply because new forms of commerce were created after the founding, it does not follow that exercising one’s right to live and breathe can be re-defined as a form of commerce simply to suit a particular agenda.

  8. Good piece by Larry Tribe in the Times today:

    http://www.nytimes.com/2011/02/08/opinion/08tribe.html?partner=rssnyt&emc=rss

    He writes “the health care law is little different from Social Security. The court unanimously recognized [United States v. Lee, 455 U.S. 252 (1982)]
    in 1982 that it would be ‘difficult, if not impossible’ to maintain the financial soundness of a Social Security system from which people could opt out. The same analysis holds here: by restricting certain economic choices of individuals, we ensure the vitality of a regulatory regime clearly within Congress’s power to establish.”

    We heard the next portion here first from Nal:

    “Even if the interstate commerce clause did not suffice to uphold mandatory insurance, the even broader power of Congress to impose taxes would surely do so. After all, the individual mandate is enforced through taxation, even if supporters have been reluctant to point that out.”

    Tribe’s conclusion supports my argument that health care legislation is a legislative issue for the elected representatives of the people, not the unelected judiciary:

    “There is every reason to believe that a strong, nonpartisan majority of justices will do their constitutional duty, set aside how they might have voted had they been members of Congress and treat this constitutional challenge for what it is — a political objection in legal garb.”

  9. Nal, good quote from Hamilton.

    Madison’s narrow interpretation of the commerce power was not shared by Congress, since he vetoed internal improvements legislation. The leaders who built the United States into a great nation rejected his views. Henry Clay and John Quincy Adams and others went ahead and built roads and canals, and others later created a national rail system through federal land grants. Today we have a national interstate highway system and a national system of airports and air traffic control. We have them because they are essential to commerce among the states, as well as with other countries.

    The framers never thought that commerce include rail or air travel. So is national regulation of air and rail travel also unconstitutional? Don’t be ridiculous.

    These cherry picked quotes from certain selected founders are leading inexorably to the absurd. If health care reform is unconstitutional, then so are national highways, canals, railroads and air transport.

    Here is Madison’s 1817 veto message holding the Eisenhower Five Star Interstate Highway system unconstitutional:

    “‘The power to regulate commerce among the several States’ can not include a power to construct roads and canals, and to improve the navigation of water courses in order to facilitate, promote, and secure such commerce without a latitude of construction departing from the ordinary import of the terms strengthened by the known inconveniences which doubtless led to the grant of this remedial power to Congress..

    “If a general power to construct roads and canals, and to improve the navigation of water courses, with the train of powers incident thereto, be not possessed by Congress, the assent of the States in the mode provided in the bill can not confer the power. The only cases in which the consent and cession of particular States can extend the power of Congress are those specified and provided for in the Constitution.”

    http://www.constitution.org/jm/18170303_veto.htm

    Madison was also a very weak President who neglected to spend any money on the defenses of Washington, leaving it open to attack in the War of 1812. He and Dolley had to scurry away from the invading British with the White House silver.

    Does anyone really want to put Madison’s narrow, antiquated ideas on the scope of the commerce power into actual practice?

  10. Alexander Hamilton has a different take on the General Welfare clause:

    Alexander Hamilton, Report on Manufactures

    A Question has been made concerning the Constitutional right of the Government of the United States to apply this species of encouragement, but there is certainly no good foundation for such a question. The National Legislature has express authority “To lay and Collect taxes, duties, imposts and excises, to pay the debts and provide for the Common defence and general welfare” with no other qualifications than that “all duties, imposts and excises, shall be uniform throughout the United states, that no capitation or other direct tax shall be laid unless in proportion to numbers ascertained by a census or enumeration taken on the principles prescribed in the Constitution, and that “no tax or duty shall be laid on articles exported from any state.” These three qualifications excepted, the power to raise money is plenary, and indefinite; and the objects to which it may be appropriated are no less comprehensive, than the payment of the public debts and the providing for the common defence and “general Welfare.” The terms “general Welfare” were doubtless intended to signify more than was expressed or imported in those which Preceded; otherwise numerous exigencies incident to the affairs of a Nation would have been left without a provision. The phrase is as comprehensive as any that could have been used; because it was not fit that the constitutional authority of the Union, to appropriate its revenues shou’d have been restricted within narrower limits than the “General Welfare” and because this necessarily embraces a vast variety of particulars, which are susceptible neither of specification nor of definition.

    It is therefore of necessity left to the discretion of the National Legislature, to pronounce, upon the objects, which concern the general Welfare, and for which under that description, an appropriation of money is requisite and proper. And there seems to be no room for a doubt that whatever concerns the general Interests of learning of Agriculture of Manufactures and of Commerce are within the sphere of the national Councils as far as regards an application of Money.

    The only qualification of the generallity of the Phrase in question, which seems to be admissible, is this–That the object to which an appropriation of money is to be made be General and not local; its operation extending in fact, or by possibility, throughout the Union, and not being confined to a particular spot.

    No objection ought to arise to this construction from a supposition that it would imply a power to do whatever else should appear to Congress conducive to the General Welfare. A power to appropriate money with this latitude which is granted too in express terms would not carry a power to do any other thing, not authorised in the constitution, either expressly or by fair implication.

  11. James Madison said:

    “If Congress can employ money indefinitely to the general welfare, and are the sole and supreme judges of the general welfare, they may take the care of religion into their own hands; they may appoint teachers in every State, county and parish and pay them out of their public treasury; they may take into their own hands the education of children, establishing in like manner schools throughout the Union;
    they may assume the provision of the poor; they may undertake the regulation of all roads other than post-roads;
    in short, every thing, from the highest object of state legislation down to the most minute object of police,
    would be thrown under the power of Congress…. Were the power
    of Congress to be established in the LATITUDE CONTENDED FOR,
    IT WOULD SUBVERT THE VERY FOUNDATIONS, AND TRANSMUTE the very NATURE OF THE LIMITED GOVERNMENT established by the people of America.” (My emphasis)

    And so congress may do all the above things if congress takes NAL’s viewpoint of the meaning of the General Welfare clause.

    Therefore, the notion that Obamacare is constitutional vis a vis the GW clause is erroneous (because it is not an enumerated or implied power). The issue is the power to tax and spend for that which is allowed and that which is allowed has to be an enumerated or implied power. Obamacare is not enumerated or implied in the Constitution EXCEPT as being a power of the states or the people (vis a vis the 10th Amendment).

    You must amend the Constitution to permit Obamacare.

    But I don’t expect criminal types to get the knack of this law stuff.

    Professor Rob Natelson’s one hour audio lesson on the General Welfare clause:

    http://www.tenthamendmentcenter.com/2009/11/19/rob-natelson-a-lesson-on-the-general-welfare-clause/

  12. Hi Bob Esq.

    I was not saying that I have no problem with the government claiming unlimited power for itself… only pointing out that it is almost a fait accompli.

    Someday soon someone in Washington will add a rider to Obamacare to prohibit exhalation of CO2 into the atmosphere, and those who cannot afford to pay the fee or penalty will simply suspend all
    inhalation activity until such time as they are able to remit
    the required amount.
    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

  13. Vince – thanks for that quote – I think it may end up being very important.

    I read through the 16th Amendment (Income Tax):
    The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

    I wasn’t sure about the wording of the final legislation, but it sounded like a very broad reading of the 16th would allow something of this sort.

    If that quote is correct, then it really does sound like the 16th could allow Congress to set up some sort of “everyone above this income level gets this annual tax, but we’ve created this exemption….” (In other words, it sounds like how the Romneycare fine/exemption works) If we can exempt the interest from a mortgage on a primary residence, then why can’t congress “incentivize” the purchase of health insurance?

  14. The tax promotes the general welfare by making health services available and affordable.

    It does nothing of the kind.

    It is a stretch to call the penalty a tax. It is a penalty for failure to purchase a service from a private company and you get nothing in return for it. People who end paying the penalty get no healthcare services from the federal government. It is not as if the federal government will begin compensating healthcare providers for treating the uninsured. The qualification requirements for the tax credit means many middle class families will not qualify and many that do will still not be able to afford healthcare.

    As has been pointed out many times, the credit will not cover the current cost of yearly premiums and those premiums have continued to rise (in the double digits) since the law was debated. While the credit is supposed to cover premiums only, there will still be other out-of-pocket costs which people will not be able to afford because the law did not address the runaway prices of private medical care and drugs. The law states only reasonable increases to premiums are allowed but it never defines reasonable. It will probably end up being like “reasonable compensation” in the tax code for business expense deductions, which means the sky is the limit.

    In terms of the poor being directed to Medicaid, good luck finding a provider that accepts Medicaid, as most do not.

    I could accept the tax angle if the law enacted a true tax, giving a credit to those that purchased private insurance, while directing the collected revenue into Medicare and allowed those people paying it to get the full benefits out of that system.

  15. There is no evidence that Obamacare is constitutional. There is only the hopes and wishes by the lawless criminal types among us.

    Signed,
    Tootie the Unfit.

  16. Nal and Vince,
    Well done. The discussion here reinforces my belief that the Affordable Care Act is constitutional. I do believe that the mandate passes on its own merits, but this just adds fuel to that argument that the bill will pass constitutional muster.

  17. Here is a posting over at Volokh:

    http://volokh.com/2011/02/07/akhil-amars-defense-of-the-individual-mandate/#comment-1129176

    Quoting:

    epluribus says:

    Those who deny that the so-called “mandate” (in reality the “minimum essential coverage” requirement) is a tax are ignoring the actual provisions of the law. It is a tax, and an income tax, at that. The “minimum essential coverage” requirement is part of the Internal Revenue Code (see 26 U.S.C. Sec. 500)A). Failure to maintain “minimum essential coverage” subjects an income taxpayer to a “penalty” as measured by taxable income. The amount of the “penalty” rises from $95 per year in 2014 to $750 after 2016, but there is no “penalty” if the amount exceeds eight percent of a taxpayer’s household income, and no “penalty” if a taxpayer’s household income is under 100 percent of the poverty line. If a “penalty” is payable, it is paid with the taxpayer’s income tax return. As Charles Fried pointed out in his Senate testimony, there is no “minimum essential coverage” requirement (i.e., no “mandate”) for individuals who have no taxable income. The requirement arises only when the individual receives taxable income. The law explicitly provides that no other enforcement can be used to collect the “penalty”–no criminal prosecution or fines and no liens or levies. In other words, it can only be collected as part of the individual’s income tax obligation, and it can only be paid on the individual’s income tax return. It is a tax, and an income tax, at that.

  18. Vince,

    Good paper. It links to VCer Ilya Somin, who says:

    The example I like to use when I teach constitutional law is asteroid defense (which may not be covered by the “common defense” section of the Spending Clause, because that provision may refer only to protection against enemies, as opposed to natural phenomena).

    I’d like to take that class. I wonder if he considers disease a natural phenomenon.

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