Obamacare and the Origination Clause: What’s a bill “for”?

August 07, 2015 | By TIMOTHY SANDEFUR

Four D.C. Circuit Court Judges, led by Judge Brett Kavanaugh, dissented from their colleagues’ decision not to reconsider their ruling against our Origination Clause challenge to Obamacare. Here’s a quick summation.

The Origination Clause says, “All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.” What happened with Obamacare, however, was something completely different: the Senate took a short bill the House had passed, which would have given veterans tax credits for buying their first homes and raised the penalties for corporations that are late paying their taxes, and “amended” it by striking out its entire text and replacing it with the 2,500+ page mess that is Obamacare. We argue that if the Individual Mandate in Obamacare is a tax, as the Supreme Court said it was in its famous 2012 ruling, then it should have originated in the House. We argue that the Senate’s gut-and-replace procedure violates the Origination Clause.

In its ruling against us, the D.C. Circuit held that although the Individual Mandate is a tax, it’s not a “bill for raising revenue,” and therefore the Origination Clause doesn’t apply. It therefore didn’t get to the question of whether the gut-and-replace process is acceptable or not.

In ruling that the Individual Mandate is a tax, but not a bill for raising revenue, the panel relied on some precedents that hold that while taxes must originate in the House, legislation that only “incidentally” raises revenue does not have to. The Individual Mandate, the court said, is a tax, but it’s not for the purpose of raising revenue—it’s for the purpose of forcing people to buy health insurance. Therefore it’s not “for raising revenue.”

The problem with that decision—as Judge Kavanaugh points out in today’s opinion—is that the Constitution doesn’t differentiate taxes by reference to what their purposes are. A bill for raising revenue is still a bill for raising revenue, whatever the purpose of raising that revenue might be. Sin taxes are the most obvious examples: a cigarette tax or a tax on alcohol is still a tax, even though Congress might have passed it on order to get people to smoke or drink less. The Supreme Court has never said that a tax isn’t a tax because of its “purpose.” While it’s differentiated taxes from penalties or from fees, it has done so by looking at how the law in question operates, not at whether it was subjectively intended to accomplish some broader goal. Thus in the Munoz-Flores case (which is the most important Origination Clause precedent), the Court said that the law wasn’t a tax because the money went into a discrete fund earmarked for specific purposes, instead of into the general treasury. But the money from Obamacare’s Individual Mandate does go into the general treasury, for Congress to spend as it pleases. And we know the Individual Mandate can’t be a penalty, because the Supreme Court said it wasn’t in the 2012 case.

To say  a tax isn’t subject to the Origination Clause because its overall purpose was some broader social goal is, as Judge Kavanaugh writes, a dangerous new idea that “exempt[s] a substantial swath of tax legislation from the Origination Clause,” contrary to the Constitution and binding legal precedent. Worse, it would be impossible to enforce the panel’s “purpose” approach anyway. “Imagine a simple gas tax bill introduced in the Senate,” writes Judge Kavanaugh. “Suppose that the bill is combined with a major national security bill also introduced in the Senate. Does that render the combined Senate bill exempt from the Origination Clause because the national security purposes predominate? Of course not. If it were otherwise, the Senate could systematically evade the Origination Clause by tacking Senate-originated revenue provisions onto other Senate-originated bills.” There is “no case or precedent” which has held that “a tax that seeks in some way to influence conduct” is made “exempt from the Origination Clause merely because such a tax also has a purpose of encouraging or discouraging certain behavior.” Yet that’s what the D.C. Circuit held.

We’re surrounded by taxes that seek to influence behavior: sin taxes, for instance, or certain sales taxes or tariffs. According to the panel decision, these are immune from the Origination Clause because they have some purpose other than raising money for the government. That carves out a vast new loophole in the Constitution—and, most alarmingly, in the provision of the Constitution that was meant to ensure that the taxing power stays in the hands of the most democratic branch of the Federal Government.

The dissent’s answer to this is that “[t]he Clause’s critical word…is ‘for.’” A bill is “for” raising revenue if it has “the purpose or object” of raising revenue. But how do we determine a thing’s “purpose” or “object”? Do we determine it based on the subjective intention of the thing’s maker? Or do we determine it based on its structure, function, and effect? And how tightly do we draw the circle? Is a bill that imposes a military draft “for” raising an army? Or is it “for” defeating the enemy? Or is it “for” making the world safe for democracy? An omnibus bill, or a 2,500+ page monster like Obamacare, has many different clauses with many different purposes. The panel’s use of “for” is overly subjective—and it has a perverse consequence: it encourages the legislature to evade its democratic responsibilities by crafting extremely large bills that can be characterized as “for” some extremely broad purpose, rather than “for” raising revenue. If the Senate originates a tax on tea, that’s unconstitutional. But if it originates a 2,500 page bill to regulate the entire tea industry, and stuffs it full of taxes, now it’s okay? That is too much weight to put on “for.” As Judge Kavanaugh writes, imagine if Obamacare had been passed as two separate bills:

One bill had all the subsidies, entitlements, and new regulatory prohibitions. The other bill had all the new taxes and revenue-raising provisions. Even the Government and the panel opinion would presumably concede that the Origination Clause applies to the latter bill. But when the two bills are combined into one bill, the requirements of the Origination Clause magically disappear, they say. That makes little sense….

(To be continued…)