March 19, 2012

Is Obamacare’s Individual Mandate an exercise of the taxing power?

By Is Obamacare’s Individual Mandate an exercise of the taxing power?

In addition to arguing that the Individual Mandate is a “regulation of commerce,” the Obama Administration also argues that the Mandate is constitutional under the taxing power. Now, this is not the same thing as arguing that it’s a tax for jurisdictional purposes—as we’ve seen, the Administration no longer claims that the Anti-Tax Injunction Act applies. But the president’s lawyers argue that the Mandate is part of an overall tax structure because the penalty will collect revenue for the government, but will exempt people who comply. It is therefore basically like a tax on certain conduct—or like a general tax increase coupled with a deduction for people who buy insurance: the Individual Mandate “serves only as the predicate for tax consequences imposed by the rest of the section. It serves no other purpose in the statutory scheme. [The statute] imposes no consequence other than a tax penalty for a taxpayer’s failure to maintain minimum coverage, and it thus establishes no independently enforceable legal obligation.”

The plaintiffs answer that the Mandate is not a tax, but a legal obligation backed by a penalty. First, Congress did not claim when enacting the law that it was a tax, and it “intentionally and unambiguously structured the mandate as an unconditional ‘requirement’ separate from the ‘penalty,’ precisely because it wanted to deprive individuals of the lawful choice to remain uninsured by paying a ‘tax.’” The wording of the statute makes clear that Congress was not trying to require people to pay a tax if they make one choice over another—but that Congress was trying to penalize people who fail to comply with something Congress wants them to do. And other sections of the PPACA declare that certain provisions shall be “deemed” taxes—which Congress would not have done if the Individual Mandate were already considered a tax.

This argument seems like an obvious throw-away argument, when we consider the Mandate in context. Although it might have been possible to structure the Mandate as a tax, Congress deliberately chose not to do so—undoubtedly because that would have increased political opposition to the PPACA, which as we know was more or less cobbled together in the dead of night to evade overwhelming opposition. Instead, the language of PPACA clearly imposes the Mandate across the board, and then penalizes it—as opposed to giving people a choice and then taxing them for making one or the other. Yes, there might be cases where the line between those alternatives is obscured, but this isn’t one of them.

Bottom line: Is the Mandate really just a kind of tax, notwithstanding the fact that Congress didn’t use the word “tax”?

Arguments set for: Tuesday, March 27

What to listen for: Can the Court uphold the Mandate as a tax without deciding the issue of the Anti-Tax Injunction Act?

If Congress could have passed a tax on all people who don’t buy insurance, and then given people a tax deduction for buying insurance, then why can’t it do what it did in the Mandate? What’s the difference?

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