A Commerce Clause victory, but …

June 28, 2012 | By PAUL BEARD

As co-blogger Timothy Sandefur rightly points out, the Court held that the Commerce Clause does not authorize the Individual Mandate—and that is a terrific victory for those of us who believe in limited government.  But, as a practical matter, how far does this victory go in reining in the Federal Government’s power to tell us what to do or what to buy?

Arguably, not far enough.

The Court held that it is “fairly possible” to construe the Individual Mandate and accompanying penalty for noncompliance as a “tax.” Construed in that way, the Individual Mandate—the so-called “tax”—was held to be constitutional under the Congress’s Taxing Clause Power.  But, if the Court’s analysis is right, it seems the Federal Government now will be able to achieve under its taxing power what it cannot achieve under its Commerce Clause power.  In other words, the fears that many of us had about a Commerce Clause loss in this case—a newly empowered Government capable of compelling individuals to engage in activity–may still become a reality through its taxing power.

After all, what’s to stop the Government under its Taxing Clause Power from forcing you to buy a car, contracting for a service,  or—in the oft-cited example—purchasing broccoli, on pain of paying a penalty for failure to do so?  We now know that the Government cannot justify such a mandate on Commerce Clause grounds.  But the Taxing Clause gives it an out:  The mandate and penalty simply can be “construed” as a constitutional tax.

In its holding, the majority cites “[t]hree considerations [that] allay [the] concern” that the Government will abuse its taxing power to do an end-run around the Commerce Clause.  But the majority’s “considerations” do not persuade.

First, it says that, while the “Constitution protects us from federal regulation under the Commerce Clause so long as we abstain from the regulated activity,” “the Constitution has made no such promise with respect to taxes.”  Huh?  This is supposed to allay our concerns?  In other words, the Taxing Clause power is more coercive, because it is actually effective in causing (the vast majority) of people to engage in the desired activity—something that the Commerce Clause cannot do.  Is there any serious doubt that, faced with the choice between paying for their own health insurance (or other good or service) and paying the IRS, the vast majority of Americans won’t choose the former?  Under the Taxing Power, the Government’s scheme effectively forces those of us who would do without health insurance to purchase it.

Second, the Court says that “there comes a time in the extension of the penalizing features of the so-called tax when it loses its character as such and becomes a mere penalty with the characteristics of regulation and punishment.”  In other words, a penalty for noncompliance with a mandate will lose its character as a tax if it is too high.  So what?  This goes to the proportionality of the so-called tax in relation to the desired activity; it does nothing to create a limit the power to creating new mandate-and-penalty schemes to begin with.  Say the Government requires those who can afford it to purchase a $15,000 from a private car manufacturer or pay a $15,000 penalty for noncompliance.  Would the $15,000 penalty be construed as a “tax”?  Why not?  Its amount reflects only the cost of the car and no more.

Finally, the Court says:  “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.”  But, again, so what?  The fact remains that the vast majority of Americans subject to a comply-or-pay scheme, like the Individual Mandate,  will purchase the good or service as opposed to giving money away to the IRS.  The Government gets what it wants, without having to use the Commerce Clause power.

To reiterate, there’s no doubt that, as a matter of principle, an important victory was secured today when a majority on the Court refused to expand the Commerce Clause to compel Americans to buy or purchase goods and services.  But we shouldn’t be surprised with the further erosion of our freedom when the Government decides to achieve that same end through its taxing power.