This new article in Tax Notes, by Professor Steven J. Willis and recent graduate Nakku Chung, both of the University of Florida’s Fredric G. Levin College of Law, explains why the non-insurance penalty provision of the new federal health control law is unconstitutional, at least if it is a tax.
In brief, the argument is: The tax is not an excise tax, and it could not be a constitutional excise tax because it is not uniform. The tax is not an income tax, and it could not be a constitutional income tax, because it is not a tax on derived income. Accordingly, the tax must be a capitation or direct tax. Article I, section 9 provides: “No capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.” The tax is not apportioned, and therefore is contrary to Article I, section 9.
As the introduction indicates, I provided some comments to the authors on a pre-publication draft of the article.
David Schwartz says:
I have not read the article completely yet, only the first five pages. It seems to me that this is kind of a pointless exercise — it’s obviously not a tax. By definition, the primary purpose of a tax is to raise revenue. The primary purpose of this tax provision is to encourage people to purchase health insurance and internalize the externalities if they don’t.
You can’t look at the commerce clause arguments and the taxing clause arguments separately. This is commerce clause regulation implemented through tax policy.
The fee is not for nothing, it is for the health insurance you get for free.
July 20, 2010, 3:44 amCTrees says:
@David: The problem is, it’s being called a tax, including in the bill. If it was called a fine or a fee (even though it logically is one of those, rather than a true “tax”), there wouldn’t be that specific constitutional problem.
July 20, 2010, 6:49 amJohnF says:
It is not always the “purpose” of a tax to raise revenue. Sometimes the purpose is to encourage or discourage some form of activity.
July 20, 2010, 7:19 amInstapundit » Blog Archive » WHY THE HEALTHCARE MANDATE IS UNCONSTITUTIONAL, if it is a tax…. says:
[...] WHY THE HEALTHCARE MANDATE IS UNCONSTITUTIONAL, if it is a tax. [...]
July 20, 2010, 7:40 amL Fletcher says:
If its a tax, doesn’t it have to originate in the House? Didn’t this one originate in the Senate?
July 20, 2010, 7:55 amNoah says:
L Fletcher – the Senate amended a House bill with the legislation so while the actual text may have originated in the Senate, the bill itself originated in the House. The House then approved what was an amended House bill.
July 20, 2010, 8:07 amDr. Love says:
JohnF. I would go further than that.
The 16th Amendment was passed in large part, to break up wealth. This is why it had so much popular support. Think of it as a complement to the Anti-trust legislation. The fear was power was accumulating in a few elites who dictated national policy against the will of the people.
(of course, the irony, it that is that the tax code merely created a different kind of powerful elite, perhaps more powerful and more entrenched who dictates against the will of the people; and the tax code ended up punishing the people who thought it would help them)
Anytime you look at the income tax, you must consider that it is concerned with social policy first. And that social policy tends to be the destruction of wealth as that is what the code was precisely designed to do in the first place. Revenue, is incidental.
July 20, 2010, 8:14 amruuffles says:
Even though I disagree, I am impressed by the principled stand of opponents of campaign finance. Their talking points more or less track their actual legal arguments: that CFR tramples on the first amendment, not that Congress lacks the power to enforce CFR.
On the other hand, the opponents of HCR are much less principled. The talking points are that it reduces freedom, increases health care costs, requires individuals to buy a product, etc etc. Yet the legal argument is that Congress lacks the power to enforce these regulations, rather than the individual is protected from such laws. In other words, these arguments would not apply to individual states (whereas decisions like Citizens United do apply to states).
July 20, 2010, 8:19 amjrose says:
I know this off point to Willis’ main conclusion, but he does discuss the possibility that the law levies a permissible regulatory fee, concluding the necessary and proper clause cannot be the authorizing source because the clause is “irrelevant for obvious reasons”.
I don’t follow. If the mandate is permitted under either the Commerce Clause directly or indirectly under the Necessary and Proper clause as a means to carry into execution a regulation of interstate commerce, then isn’t it trivial that the associated fee is also necessary and proper for executing a regulation of interstate commerce?
July 20, 2010, 8:20 amruufles says:
Can you come up with an argument that would also apply to the states?
July 20, 2010, 8:27 amBob Hayes Online » Blog Archive » If Healthcare Mandate Is a Tax, It’s Unconstitutional says:
[...] Boom. [...]
July 20, 2010, 8:34 amSteven J. Willis says:
jrose,
Thanks for the comment. I’ll have to re-read what I said on this one. It may be a few hours before I have time to respond.
To others, we preface with “If it is a tax.” We had long discussions about this. Because it is styled as a tax, I believe a Court would be irresponsible not to address the issue, even if it found a Commerce Clause or Tenth Amendment violation. For an extreme example, the entire Internal Revenue Code is surely not constitutional per the commerce clause (although some people suggest it is); however, the 16th Amendment takes care of most of it and the Excise element of the Taxing Power takes care of most of the rest. Thus I believe the Courts will inevitably reach the tax issue. I believe we explain why If it is a Tax, it does not satisfy the Constitution.
July 20, 2010, 8:46 amCassandra says:
Taxing folks for not acting is the Amerikan way.
Every year I pay through the nose, by way of tax deductions or tax credits denied, for not having health insurance benefits, for not being married and for not being a breeder. While I hope Obamacare goes down in flames as being an illegal tax or penalty, I fear that Congress will just amend Obamacare to give tax deductions or credits for those who participate in Obamacare and deny the same to those who abstain.
What’s the difference? I’ll just keep on having to support other people’s marriage, breeding and healthcare. It seems the only thing the Constitution really protects me from is being taxed to support other people’s religions, but that will probably change, too.
July 20, 2010, 8:53 amcboldt says:
– And that social policy tends to be the destruction of wealth as that is what the code was precisely designed to do in the first place –
July 20, 2010, 8:56 amSocial policy was sold as being destructive of concentrations of wealth, not wealth, per se. The redistributionist is interested in the power that accrues to himself, as the director of redistribution.
Progressive taxation of income is one of the planks of the communist manifesto.
ruufffles says:
Don’t forget their roads and bridges.
July 20, 2010, 8:58 amruufffles says:
As much as I disagree with them, I do admire the opponents of campaign finance regulation in so far as they are principled. Their talking points more or less track their actual legal arguments: that CFR infringes on the speakers’ first amendment rights, as opposed to congress lacking the power to enforce CFR.
On the other hand, opponents of health care reform have similar talking points: HCR will reduce freedom, increase costs, mandate purchases of private products. Yet their legal argument does not rest on the basis that this infringes on an individual freedom, rather that Congress lacks the power to enacts parts of HCR. In other words, the arguments would not apply to the states.
Citizens United and similar decisions apply equally to the state as well as Congress, yet nothing appears to constrain states from enacting HCR on their own.
July 20, 2010, 9:02 amruufffles says:
There’s nothing in the tax laws that affects elections.
July 20, 2010, 9:04 amjrose says:
Willis also says:
“In contrast, supporters of the healthcare act face many substantial hurdles: the commerce clause, the 10th Amendment, and the penalty’s failure as an excise tax (which has two essential parts) or an income tax (which has six essential parts). If they overcome all that, they must then address the apportionment requirement.”
That doesn’t strike me as correct. Supporters need only demonstrate the law is permitted by either the Commerce Clause or the Taxing Power, while not conflicting with either Article 1/Section 9′s restrictions on the Taxing Power nor the 10th Amendment. But, Comstock established (internal quotations removed):
“[I]f a power is delegated to Congress in the Constitution, the Tenth Amendment expressly disclaims any reservation of that power to the States … . In the end … it makes no difference whether one views the question at issue in these cases as one of ascertaining the limits of the power delegated to the Federal Government under the affirmative provisions of the Constitution or one of discerning the core of sovereignty retained by the States under the Tenth Amendment”.
Thus, if the law is permitted under either the Commerce Clause or Taxing Power (or the Necessary and Proper clause applied to either power), it satisifies the 10th Amendment.
July 20, 2010, 9:07 amUgh says:
The last time SCOTUS ruled a tax to be unconstitutional because it was a direct tax and not apportioned was…?
July 20, 2010, 9:10 amcboldt says:
– There’s nothing in the tax laws that affects elections. –
July 20, 2010, 9:11 amSure there is. When a candidate promises (and delivers) tax code that is structured to provide a windfall to a majority, that candidate is likely to be (re)elected.
Incidentally, I’m still waiting for the piece of pie Obama promised me.
U.Va. Grad says:
That’s not really a flaw. After all, it’s well-established that the states have general police powers, while the feds don’t. Through incorporation, the same isn’t true of the First Amendment’s protections.
July 20, 2010, 9:13 amruufffles says:
Congratulations. You just defined electoral politics.
Obviously you make more than $200,000.
July 20, 2010, 9:14 amruufffles says:
I didn’t say the legal argument was a flaw. I said the talking points and the legal arguments are incongruous. I would see opponents of HCR as principled if they make a more transparent argument that Congress is not trampling on individual freedom, rather Congress is exceeding its own powers.
Take the example by one of the republicans during the Kagan hearings: does Congress have the power to mandate every American eat 3 fruits and 2 vegetables a day? I would have been more impressed if he made it clear that he believed Congress lacked the power but states did have the power. But the talking point that gets through to the public is that any government should lack the power to dictate this.
July 20, 2010, 9:18 amcboldt says:
– opponents of health care reform have similar talking points: HCR will reduce freedom … Yet their legal argument does not rest on the basis that this infringes on an individual freedom … In other words, the arguments would not apply to the states. –
July 20, 2010, 9:20 amI can’t follow your argument.
But even if it is coherent, somehow, the fact that a power lies in a state doesn’t mean the power is also available to the federal government. The reverse is more often the case. That a person finds it okay for a state to exercise a power does not mean the person thinks it’s okay for the feds to exercise the same power.
cboldt says:
– But the talking point that gets through to the public is that any government should lack the power to dictate [eat 3 fruits and 2 vegetables a day]. –
July 20, 2010, 9:24 amAnd you think the person holds, but is hiding, that states should or do have the power to mandate a micro-managed diet?
Steven J. Willis says:
@ jrose, Thank you again for your many and detailed questions.
I found the answer for your earlier question more quickly than I thought. At pages 179 to about 182, we discuss the Constitutional authority for Congress to raise money. To me, the ability to raise money was the most important force behind the Constitution.
We broke the various powers into components. While perhaps not the traditional approach of a con-law professor, this is the approach of a tax-professor/CPA. Necessary and Proper serves two purposes. First, it supports explicit Powers, such as the Post Office and the Courts. If we have a Post Office, surely we can charge money for stamps. That is what we called “obvious.” But, the N & P power also supports less explicit powers – such as those found within Commerce. Regulating Health Care and requiring insurance is not explicit in the sense of the Post Office. Thus the application of N & P is at least a step removed. Thus we discussed it separately. The “irrelevant for obvious reasons” was meant to convey the lack of “explicit” authority for a health insurance requirement.
I hope this helps. I believe earlier article drafts explained it better; however, we were severely space-limited. I enjoyed, as always, working with Tax Notes and its editors; however, space is more important to them than to most journals and this was one area we cut significantly.
On your Tenth Amendment comment, I’ll think about it. But, we tried to limit ourselves substantively to tax issues under the assumption this is a tax. I’d rather leave the Commerce and Tenth Amendment issues to Randy and David and others who specialize in those areas. But I believe tax specialists should be commenting on the tax issues.
July 20, 2010, 9:25 amruufffles says:
That’s exactly my point. Nobody is saying that in their talking points. The argument is more likely to be that the government, any government, lacks the ability to exercise this power.
Again, my criticism is not of the legal argument, but how it contrasts with the talking points.
July 20, 2010, 9:25 amruufffles says:
Yes! Or more precisely, that they are hiding that the argument they are using to constrain the federal gov’t does not apply to the states.
I have yet to see the argument that states lack this power but I would gladly read any references you can point me to.
July 20, 2010, 9:26 amFat Man says:
Pollock v. Farmers’ Loan & Trust Co. 157 U.S. 429 (1895); 158 U.S. 601 (1895).
The response to Pollock was the 16th Amendment.
July 20, 2010, 9:29 amcboldt says:
– I would see opponents of HCR as principled if they make a more transparent argument that Congress is [??]not[??] trampling on individual freedom, rather Congress is exceeding its own powers. –
July 20, 2010, 9:29 amHuh? It’s not principled to argue that the federal government is acting outside of its enumerated powers? Is the only principled argument “tramples freedom?” It seems your whinge here is simply that federalism exists.
Steven J. Willis says:
1895.
But, by 1913, we had the 16th Amendment which substantially changed the Taxing Power limitations; hence, the importance of analyzing the “penalty” in terms of the 16th Amendment. Alas, it fails, which returns us to the Direct Tax apportionment requirement.
July 20, 2010, 9:31 amruufffles says:
Sure, they legally argue the former, but their talking points emphasize the latter.
I’d feel more satisfied if my freedoms were protected from both the state gov’t and the federal gov’t. Why should the state I live in be able to forcefeed me my DRS of fruits and veggies but the federal gov’t can’t?
July 20, 2010, 9:33 amcboldt says:
– I have yet to see the argument that states lack this power but I would gladly read any references you can point me to. –
http://en.wikipedia.org/wiki/Massachusetts_health_care_reform#Legal_challenges
July 20, 2010, 9:33 amcboldt says:
– I’d feel more satisfied if my freedoms were protected from both the state gov’t and the federal gov’t. –
July 20, 2010, 9:37 amThe battlefield is fairly complex. I think all rational observers agree that a federal encroachment on freedom touches more people in one go, than a similar enactment by an individual state. And, at this moment in history, the federal government has in fact acted.
ruufffles says:
That looks like they based it on the Massachusetts constitution. I was thinking about the US constitution.
July 20, 2010, 9:38 amKevin says:
Well, you could look at it as a strict head tax, apportioned as much as the Census is correct, coupled with a 100% refund for the act of purchasing health insurance.
Of course, it would greatly help if the statute included that mechanism; I think it is a bit much for a judge to divine that from the current law.
July 20, 2010, 9:38 amcboldt says:
– Why should the state I live in be able to forcefeed me my DRS of fruits and veggies but the federal gov’t can’t? –
July 20, 2010, 9:44 amNot accepting or endorsing that states have this particular power, but in general, see federalism. That’s the nature of the beast. Some powers are reserved to the states, or the people. The overarching bias of the federal constitution is supposed to be minimum government and maximum self-determination.
And taking “forcefeed” literally, my response would be “make me.” The RKBA comes into play at some point in this calculus. The only way I’m forcefeed is by the literal use of physical and violent force.
cboldt says:
– That looks like they based it on the Massachusetts constitution. I was thinking about the US constitution. –
July 20, 2010, 9:46 amRuuffles, ruffles, ruffles, my cite was in response to your challenge, “I have yet to see the argument that states lack this power …”
Have a nice day.
ruufffles says:
Massachusetts is one state. Using plural states, I was implicitly referring to the US Constitution. Think about it, Massachusetts or any state, could just tack onto their constitution a provision allowing for forcefeeding of fruits and veggies.
July 20, 2010, 9:48 amNowMDJD says:
Right.
The First Amendment applies to the states through incorporation by the 14th Amendment. Citizens United (which strikes down a federal law) is based on this amendment. State laws may not violate the US constitution, either, including the first amendment.
There is no real analogy to regulation of health care. The power of Congress to pass any laws (including health care regulation) is limited to what is specified in the Constitution, especially (for purposes of health care regulation) Article I (whose Section 8 includes the Commerce clause, the Tax clause, and the Necessary and Properr clause), and the 16th Amendment, permitting an income tax. The Bill of Rights does not address this.
On the other hand, states have a so-called police power to enact laws for the benefit of public health, safety, and welfare. If not otherwise constrained by Federal law, this includes laws regulating and paying for health care. Massachusetts, Vermont, and Hawaii, most famously, have done this comprehensively. All states regulate health insurance, the practice of medicine, etc., and all pay for some care. Even Louisiana has a state charity hospital system.
July 20, 2010, 9:50 amUgh says:
Pollock v. Farmers’ Loan & Trust Co. 157 U.S. 429 (1895); 158 U.S. 601 (1895).
Right. 115 years ago. And I believe that each time the Court has faced the question since then, i.e., whether the tax at issue was a direct tax subject to apportionment, or some other kind of tax not subject to apportionment, it has decided the tax was the latter (IIRC). Odds of it deciding the healthcare tax is a direct tax subject to apportionment are, it seems to me, very very small (you might get Thomas’s vote).
From the syllabus:If the Court were to approve it as a uniform Excise Tax, the Direct Tax apportionment requirement would be eviscerated.
Aren’t we already there?
July 20, 2010, 9:56 amcboldt says:
- -Think about it, Massachusetts or any state, could just tack onto their constitution a provision allowing for forcefeeding of fruits and veggies. –
July 20, 2010, 10:10 amYou missed your calling. You should be a comedian (or comedienne, as the case may be). That’s right up there with Carlin.
Mandatory cigar smoking too, I suppose. It’d do wonders for tobacco tax revenue. And imaging the fun with mandatory shots!
ruuffffles says:
I think you missed my point. I don’t support such a law. I just think it’s silly to be fine with the state gov’t impose it but not with the federal gov’t imposing it.
July 20, 2010, 10:19 amSuperSkeptic says:
Alas, me too!
July 20, 2010, 10:20 amJoe says:
Pollock v. Farmers’ Loan & Trust Co. 157 U.S. 429 (1895); 158 U.S. 601 (1895).
And, that was a controversial 5-4 ruling that — though you wouldn’t know it from a lot of commentary — did not even illegitimate all types of income taxes. Or, at the very least, a tax on “occupations” or “corporations” (or inheritance, btw) were allowed. Plus, after the 16A was passed, the Supreme Court early on said it in effect brought us back to what appeared to be the originally intended rule in respect to income tax apportionment.
As to taxes for raising revenue, early on, regulatory tariffs (in a way Madison accepted in some forms) showed the various purposes of the tax power. So, as with “taxing for being alive” things like “the primary purpose of a tax is to raise revenue” (putting aside that the tax does raise revenue along with other aspects of the law, if a small amount — are we now to rely on legislative history? the horror!) is not convincing.
July 20, 2010, 10:24 amChristopher says:
Because that’s a state matter. The Constitution of the United States wasn’t designed to protect you from your state government (which is why even the First Amendment only applies to the states through a textually shaky incorporation through the Fourteenth Amendment); it was designed to delegate those powers necessary to running the nation to the federal government while protecting the people and the states from the federal government exceeding those powers. It’s up to you as a citizen of your state to make sure your state constitution protects you from excess in your state government. As a libertarian I agree with you that the state should not have the right to dictate what I eat, but as a federalist I don’t think we should grant the federal government the power to stop it, either.
July 20, 2010, 10:30 amG.R. Mead says:
Eviscerated. Having the guts removed. Seems we are there already. We have an admininstration that changes its supposed facts like soiled underwear. Supreme Court Nominee Kagan has a “respect” for the rule of law that encompasses:
1) willful violations of court orders she does not like (Harvard miltary recruiting)
2) Witness tampering as an federal officer and officer of the Court (drafting material changes to the final submitted statement for the American Gynecological Association when they “got the answer wrong” on the partial birth abortion case)
3) Willfully failing to argue the stated statutory grounds for DOMA, creating a collusive interpretive destruction of enacted legislation — rather than resign if she was not able to conscientiously defend it on all possible grounds.
At some point the willingness to shape “law” by clever rationalization and bureaucratic thin-slicing to whatever whim of those with position, becomes transparent. If we get there, God help us. I personally see signs of this systemic disregard of law and rules vastly increasing in the civil arena — the victims of sclerotic court processes, and fatuous positional arguments that take adavantage of them.
We are perilously close with people who, being positionally advantaged, disregard the clear law that would correct the situation against their interest — so that other people thus disadvantaged and faced with a neutered law — are presently going to stop respecting both the position of others, AND the law. Then all Hell breaks loose, and the Devil takes the hindmost. The regulatory, interpretive, manipulatory, positivist mindset exemplified by Kagan and her ilk cannot think past that sharp discontinuity , nor even see it approaching.
This could be very bad; possibly unrecoverable — and anybody who says otherwise is ignorant of humanity and history.
July 20, 2010, 10:42 ambyomtov says:
The main point of those like myself, who argue that it is a tax is that it is no different, substantively, from a host of other credits and deductions. The paper’s counter-argument is:
Deductions and credits differ greatly from taxes. Superficially, they resemble each other: They each appear in the code, they involve numbers, and they have economic consequences. The same is true of deductions and taxes.
Congress may, under the 16th Amendment, allow deductions and credits as it pleases; they are matters of legislative grace. However, taxes exist because of the enumerated — and limited — taxing power. Congress also has authority under the spending power to pay money or to make some credits (or even deductions) occasionally refundable. But just because Congress may encourage specific behavior by giving people money or benefits does not mean it may do so by taking money from them. That requires taxing power.
This is not convincing. There is no difference between the two. If one store charges a premium for paying with a credit card, and and another offers a discount for paying with cash, they are doing the same thing.
A tax credit for doing something is in no substantive way different from a penalty for not doing it. All the verbiage about Macomber and so on doesn’t conceal that. (Though the idea that there were those who took seriously the losing arguments in that case and Bruun casts light on why this is idea so hard to grasp).
July 20, 2010, 10:56 amscattergood says:
This is not convincing. In both cases you HAVE TO ACTUALLY GO TO THE STORE AND BUY SOMETHING to get the benefit. In either case the fees / credit apply to a behavior. In no case do you pay the fee or get the credit for walking by and / or window shopping.
For ObamaCare the behavior is being born and continuing to breathing, and that’s the issue.
Macomber again had an action, the purchase and ownership of stock shares. Macomber didn’t pay a tax and sue because she looked at Standard Oil stock and thought about buying it.
Bruun, again the court specifically states that the taxpayer received a benefit “as a result of a business transaction”.
So I don’t see how you can claim that “a tax credit for doing something is in no substantive way different from a penalty for not doing it” based on the cases you site. In BOTH of them, an action was required to even contemplate the tax or credit.
July 20, 2010, 11:32 amSDN says:
I pay for roads and brides through the gas tax. The more gas I use, the more I pay. If I want to pay less, I use less. How much I use and pay for with MY money is the issue.
You are an obvious holder of the Order of the Plexiglass Navel, with clusters.
July 20, 2010, 11:48 ambyomtov says:
So I don’t see how you can claim that “a tax credit for doing something is in no substantive way different from a penalty for not doing it” based on the cases you site. In BOTH of them, an action was required to even contemplate the tax or credit.
I wasn’t citing those case in support of my argument. As I understand Macomber, perhaps incorrectly, the company paid a proportional stock dividend. That is, if you owned 100 shares you got 10 more, if you owned 1000 you got 100 more (these are not the actual numbers, I think). How that “distribution, which is nothing but some arithmetic, could be considered income, befuddles me. In Bruun I think the benefit is clear and should be income. Let me emphasize that my information on both cases comes from a quick reading of the article, so it’s possible I’m overlooking something. But that’s irrelevant to my argument. I was just trying to say that it strikes me that lawyers sometimes have difficulty distinguishing form from substance in economic matters.
And the argument of “doing something” is the same. If you do R&D (buy insurance) you get a credit (avoid a penalty). If you don’t do R&D (don’t buy insurance) you don’t get a credit (do pay a penalty). You are penalized for not doing R&D simply because you are an active business.
Similarly, you don’t get a mortgage deduction (which means you pay a penalty) if you don’t buy a house. Just the act of living and breathing exposes you to a higher tax, which you can avoid by buying a house.
July 20, 2010, 11:49 amSDN says:
And if it’s not a tax, the bill was passed illegally through the reconciliation process. And that was part of the dishonesty at the time.
July 20, 2010, 11:50 amHealth Care Constitutionality | Snowflakes in Hell says:
[...] on arguing the health care mandate is a legitimate exercise of Congress’ taxing powers. But noted over at Volokh: The tax is not an excise tax, and it could not be a constitutional excise tax because it is not [...]
July 20, 2010, 12:08 pmObama Lied About Mandatory Health Care Being a Tax - Politics and Other Controversies -Democrats, Republicans, Libertarians, Conservatives, Liberals, Third Parties, Left-Wing, Right-Wing, Congress, President - Page 3 - City-Data Forum says:
[...] and therefore is contrary to Article I, section 9. Of Constitutional Decapitation and Healthcare Link 1 | Link [...]
July 20, 2010, 12:15 pmcboldt says:
– I pay for roads and brides through the gas tax. –
July 20, 2010, 12:22 pmNow I don’t care who you are, that’s funny, right there!
geokstr says:
Vindicated at last!!!!
On a post several days ago, I predicted that Eric Holder will soon rename Muslim honor killings as “Justifiable Man-caused Domestic Decapitations”, a misdemeanor with a maximum (suspended) sentence of gathering at least 1,000 fake Democratic voter registrations per violation.
Everyone scoffed. Yet here it is, and not only that, it’s called “constitutional” right there in the title, which also implies that such Cranial Removals might even be covered under HCR.
Take that, lefties.
:-)
July 20, 2010, 12:25 pmcboldt says:
– And if it’s not a tax, the bill was passed illegally through the reconciliation process. –
July 20, 2010, 12:27 pmFWIW, the legislative process isn’t constitutionally infirm, and the “illegal” process is merely a set of Congressional rules that have no constitutional impact. Plus, the function of “cheating” was to surmount a 60 vote hurdle, also erected by Congressional rule but having no basis in the constitution.
A majority of Congress passed the law. The question becomes whether or not what they passed is within the ambit of the federal government’s enumerated powers.
Kazinski says:
That is what your state constitution is for. If you want a nanny state that bans cigarettes, trans-fats, vending machines, etc., then that’s what your going to get. Otherwise vote the bastards out, or vote with your feet.
July 20, 2010, 12:53 pmscattergood says:
Again, I don’t think your position is logical.
You put the cases mentioned directly in the text, if not to support your position, why put them there?
However, I agree, many lawyers have really no idea about economics. Just as I am sure most lawyers will claim that many economists don’t have a clue about the law. :)
But I still don’t think your line of thought makes sense:
If don’t do R&D you don’t get a tax credit is not the same as if you don’t do R&D you pay a fine.
We are not taxed just merely for living, we are taxed for behaviors. To say that living is a behavior, that is a bit much. In every example you have brought up a behavior is necessary.
As you point out, you are EXPOSED to taxes by buying things, engaging in commerce, etc., but you are not necessarily forced to pay them. If you don’t earn money, you don’t pay the income tax. If you don’t buy things, you don’t pay the sales tax. However, if as a taxpayer you buy your house, you can pay less tax on your income (and earnings).
However ObamaCare’s tax / penalty is directly levied for NOT doing something. It would be like saying, if you don’t earn $20K a year, you are penalized by paying the gov’t $500. And then the gov’t claiming that they are only using their taxing powers to tax people for not earning enough to pay enough taxes.
July 20, 2010, 1:00 pmChris Travers says:
The weakness of this argument strikes me as applying to the 2.5% AGI penalty. This very well could be argued to be a tax on income. After all, it is tied to income although it is not triggered by derivation of income, the income it taxes is in fact derived from other sources. I think on the whole I’d conclude that is allowed by the 16th Amendment.
But what of the minimum penalty? It’s closely tied to the 2.5% AGI penalty, but it is not a tax on income. It therefore strikes me as a capitation tax applied to everyone in a certain income bracket and not meeting appropriate Constitutional requirements.
There’s also a number of other real Constitutional issues in this bill. If a man marries a foreigner and they live at 150% of the poverty line, he can’t get medicaid for his wife for the first five years but probably can’t buy insurance on the exchange. Can the government really penalize him for not purchasing a product he cannot afford when the government programs that would normally apply to his income brackets are rendered unavailable by Congress? Or does that run amok with due process and the deprivation of property?
(And you thought Republicans were anti-Immigrant….)
July 20, 2010, 1:01 pmChris Travers says:
Also before you say “the minimum penalty is Constitutional as a fine” I don’t think that works either without running afoul with the 14th Amendment because the fine only applies if you are poor. I also don’t think it’s Constitutional where government aid programs are also withheld to the poor people who are fined (recent immigrants and the like).
There’s also a takings issue IMO in that one is required to pay into an insurance pool for public use whether or not the insurance pool is reasonably obligated to cover that person. I think if someone is out of the country for a few months, for example, I don’t think this can be Constitutionally required.
July 20, 2010, 1:09 pmKazinski says:
I don’t doubt that Congress could structure the mandate as tax and make it work, but the problem is that they didn’t. They said is was a penalty using an imaginary commerce clause power. So to fix it it will need a legislative fix, and that is very unlikely to happen. About the only way it could happen is in a lame duck session, with some reconciliation or budget slight of hand to get through without 60 votes in the Senate.
July 20, 2010, 1:53 pmAdam Coates says:
So, regardless of whether this is a “tax” or “fine”, isn’t there SC precedent that says Congress cannot use such penalties to regulate activities that they could not regulate otherwise? (I recall hearing this, though if somebody could point me to the relevant case(s) that would be awesome.) In that event, does it just boil down to a (dubious and bound to fail) Commerce Clause argument no matter how they wrap it up?
July 20, 2010, 2:34 pmSpitzer says:
The mistake Congress made was to attach punitive language to the tax (by the way: not a fan of the bill or underlying policy in any way). Had they done otherwise, there is at least a chance that the courts could have said that the “tax” is actually imposed on everyone, with a “tax credit” that is given to those who purchase approved health insurance (not unlike, say, the mortgage interest deduction). The claim would remain on shaky grounds, however, because other tax credits are also linked to the Commerce Clause, while there is a more than negligible argument that insurance is not subject to that clause (in light of prior Court precedent indicating that insurance is actually purchased within the state in question, and is therefore subject to licensing from the state in question). I think there are useful added arguments (i.e. that the law violates the constitutional right to healthcare privacy, or that it is a Taking).
Of course, unless the right to healthcare privacy has legs, I doubt these (federal) constitutional arguments would run against the states. But, as has been stated, that is just the price of federalism.
July 20, 2010, 2:51 pmbyomtov says:
Scattergood,
If don’t do R&D you don’t get a tax credit is not the same as if you don’t do R&D you pay a fine.
This is really the heart of our disagreement. I do think they are the same.
If my tax bill changes according to whether I do R&D or not then I don’t care whether the difference is called a credit or a penalty or anything else. I end up writing a bigger or smaller check all the same. Money is money.
July 20, 2010, 2:53 pmKazinski says:
That’s where you are wrong, because it assumes your tax bill is a constant given. I have other ways of reducing my tax bill to make it so the credit doesn’t affect me. I can switch my investments to all non-taxable Municipal Bonds, I can defer a larger part of my salary. I can take stock in lieu of payment and defer the taxes until I sell the stock.
Many of the people that the mandate applies to don’t have taxable income, so a credit, unless it is refundable, which most aren’t, wouldn’t apply to them anyway.
July 20, 2010, 3:18 pmJohn Bobbard says:
This whole controversy seems kind of silly. The individual mandate clearly operates as an income tax. Clearly the 2.5% tax of AGI is an income tax on its face. The minimum penalty ($695), while not a percentage, will not be assessed to anyone making less than $14,403 (133% of the federal poverty level), since these people will get Medicaid for free automatically. The tax is clearly taxing income, and those with no income (or an income lower than the minimum penalty) will pay no tax.
Why is this even a close question? Is it only for superficial reasons (such as where the tax was placed in the code, etc.) that have nothing to do with the actual operation of the tax (who it affects, how much it is relative to income, etc.)?
July 20, 2010, 3:38 pmscattergood says:
If you decide to be in business this cost (tax) and opportunity (R&D credit) are available to you. It is your DECISION and ACTION that create the tax and the opportunity for a rebate.
This is not the case for the mandate for insurance under ObamaCare. That’s the crux of our disagreement. You see not buying insurance the same as buying insurance. So to you then engaging in business is the same as not engaging in business, entering into a contract with somebody is the same as not entering into a contract, etc. It is inherently illogical.
July 20, 2010, 3:42 pmbyomtov says:
Kazinski,
I don’t understand your point. You seem to be saying that you can arrange your income so some hypothetical credit doesn’t matter to you. So what? It’s true that you could invest in municipal bonds, but you will be lowering your pre-tax income by doing that. I don’t see why it matters that some credits are not refundable and some are.
(And by the way, if you take stock in a publicly traded company in lieu of cash compensation that is taxable income when you get it, just like cash.)
Maybe a numerical example would help me understand what you are getting at.
July 20, 2010, 3:43 pmbyomtov says:
If you decide to be in business this cost (tax) and opportunity (R&D credit) are available to you. It is your DECISION and ACTION that create the tax and the opportunity for a rebate.
And if I decide to buy health insurance the credit is available to me, and if I don’t it’s not. Except you want to call the credit the absence of a penalty and the inability to take the credit, due to my non-participation in the health insurance market a penalty.
Similarly, I get a tax break when I decide to buy a house. That’s my decision and action that make it available. And if I don’t buy the house – just ignore the whole business – the deduction is not available.
I don’t see buying insurance as the same as not buying it. I see buying it as having a tax benefit, just like buying a house, or giving money to charity, or taking adavntage of a host of other credits or deductions. AndI see not buying it as not doing the things that give me the benefits.
If I do X I pay less tax than if I don’t do X. It’s all the same.
July 20, 2010, 3:53 pmscattergood says:
The tax is clearly NOT an income tax. Income taxes are triggered by, what’s the word, oh yea, EARNING INCOME.
This tax is triggered by NOT BUYING INSURANCE. It is apportioned by income, but it is not triggered by earning income, whether that income is salary, earnings, investments, dividends or the like.
July 20, 2010, 3:57 pmscattergood says:
Only 1/2 of your statement is correct, and that’s the one nobody actually has said is a problem. If you buy health insurance you get a credit, great, awesome!
And as you mentioned, buying insurance or buying a house you get a tax credit. And ACTION leads to a TAX CREDIT.
However if you DO NOT buy insurance you have to pay a tax / penalty. That’s what people have a problem with.
Incent the heck out of people buying insurance, that’s not the issue. It is a tax / penalty side that is the issue.
July 20, 2010, 4:00 pmbyomtov says:
Scattergood,
Let’s simplify things.
Suppose the government simply said, “In order to encourage people to have health insurance, we will provide a refundable tax credit of $1000 to anyone who buys health insurance.” (Note, by the way, that this is not wildly different from current policy, where the government lets you off the tax hook for insurance providied as compensation by your employer.)
Would that be unconstitutional?
July 20, 2010, 4:28 pmjrose says:
I know of no precedent that treats differently how the Necessary and Proper clause applies to “less explicit” powers (e.g., the Commerce Clause) and “more explicit” powers (e.g., the Post Office). So, it can’t be “obvious” that this distinction exists when it comes to determining whether a fee is necessary and proper.
July 20, 2010, 4:39 pmPES says:
With respect to (1), that is how many if not most laws are challenged to test their constitutionality. I understand that it may seem odd to a layman, but no lawyer in the world will find fault with that particular mode of operation, assuming she had a good faith belief that the law was constitutionally infirm.
Don’t know anything about (2), so can’t comment on it.
As to (3), I doubt seriously that Kagan had anything to do with the defense of DOMA in the district court. The Solicitor General’s office generally does not handle district court level litigation. The Massachusetts cases, in particular, were handled by the US Attorney for that district and the DOJ civil division, not the Solicitor General’s office.
So…in other words, I fail to see your point.
July 20, 2010, 5:00 pmKazinski says:
I don’t doubt that Congress could structure the mandate as a tax, apply it to everybody, and give an offsetting credit to anyone that buys health insurance or qualifies for medicaid. But they didn’t. So doing a little hand waving and hoping the courts will say ‘because you could have done it right we’ll let it slide that you structured the mandate as penalty rather than a tax’ shouldn’t be an option. What the courts generally do in such situations is tell congress to go back and do it right. Just because the Democrats no longer have the votes doesn’t mean the courts should sign off on an unconstitutional exercise in power.
It would be much the same as if a judge decided that a warrantless search was OK because the police had probable cause anyway and they could have gotten a warrant if they decided to go through the trouble.
July 20, 2010, 5:04 pmChris Travers says:
Not all will. Recent immigrants who are legal residents are still excluded. So you have a fine for not signing up for a program for which you do not qualify. And the minimum penalty kicks in at about $27k AGI.
If this was in place when I married my wife in Indonesia and quit my job to do so, I could not have returned to the US to start my business.
July 20, 2010, 5:05 pmChris Travers says:
Actually, it says that income from whatever source derived may be taxed. It doesn’t say anything about triggering that tax. A strict reading of the 16th Amendment does not preclude this sort of tax. (I think there may still be due process/equal protection issues).
The problem however is with the minimum penalty which no longer even taxes income. You can’t even pretend the minimum penalty is an income tax.
July 20, 2010, 5:08 pmChris Travers says:
This seems fair as far as the 2.5% penalty is, but what of the minimum penalty?
I don’t think x% of income plus $695 is mathematically equivalent to y% of income – $695. You can’t get around the fact that the $695 (for those making less than about $27k/yr) is no longer a tax on income. It’s a tax on the person. A capitation tax.
July 20, 2010, 5:34 pmSuperSkeptic says:
It’s off-topic, I realize, but I don’t think invoking the “integrity” of the judges on the Fourth Amendment is in any way availing… they’ve pretty much done precisely what you posit here countless times.
July 20, 2010, 6:05 pmJohn Bobbard says:
The 16th amendment does not require an income tax be a percentage of one’s income. It simply must be a tax on income. The 695 minimum penalty is clearly a tax on 695 of income. People who don’t make 695 get free Medicaid (as does anyone making up to 14,403), so it does not apply to them.
July 20, 2010, 7:33 pmJohn Bobbard says:
Whoops. Browser screwup.
July 20, 2010, 7:35 pmChris Travers says:
So suppose I lose my job Dec. 31 and am denied unemployment for some reason, and I’ve just married a foreigner who hasn’t been in the US for five years, and I end up living off my savings for the whole year, then I have no income to tax, right? Penalty doesn’t apply to me? Note my wife would not qualify for Medicaid.
July 20, 2010, 8:39 pmCassandra says:
It’s worse than that, Chris Travers.
I know Americans living overseas who haven’t set foot in this country for over 30 years. They will be surprised to learn that they will be liable to pay the penalty for not having health insurance, which in any case would not provide them medical care where they live and work overseas. Amerika is the only country that pretends to tax all income of expatriates from whatever source derived.
July 20, 2010, 8:49 pmJohn Bobbard says:
As far as I know (and correct me if I’m wrong), you would get a hardship waiver since the cheapest insurance would cost more than 8% of your income. The mandate wouldn’t apply.
And even if we assume other arguments of Congressional authority fail and the Court finds the tax applied to some unusual situation is unconstitutional (which I doubt), the most that would happen would be an as-applied exemption from the tax. They are not going to throw out the mandate or the bill because of unusual specific situations.
July 20, 2010, 9:43 pmHugh Greentree says:
It is wonderful to see that Professor Willis is still in action. I had him for a few tax classes back in 1985-86; he was also my faculty adviser. I found him to be thoughtful and wise. He is one of the reasons why the University of Florida’s Graduate Tax Program is such a success.
I wish I could read the article. I will have to dig around and see if my office has a subscription to it someplace.
July 20, 2010, 11:03 pmPES says:
You can find it online without a subscription. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1589190
July 21, 2010, 12:07 amChris Travers says:
Actually, I think what would happen is that the minimum would go away and one would be stuck paying 2.5% regardless of income.
July 21, 2010, 12:14 amMike Hansberry says:
Not only has the penalty morphed into a tax, it seems it will become of neccessity an income tax.
Pelosi wasn’t kidding when stating that we need to pass the bill to find out what’s in it (or words to that effect).
July 21, 2010, 12:46 amscattergood says:
Nope. A tax credit is not unconstitutional.
And I think you are mixing the terms Tax Credit and Income Tax Deduction. They may have the same effect of reducing the over all tax owed, but the calculations are very different.
Your contribution to your health insurance is a pre-tax deduction of your income, but the employers contributions to your health insurance under ObamaCare are now reportable for the first time. I wonder how long before it becomes part of taxable income?
But again, ObamaCare says that you HAVE to buy insurance or pay a fine / tax. Of course this is targeted at healthy / young people. Upwards of 50% of your total health care consumption, on average, occurs in the last 18 months of your life. So it is imperative that healthy (i.e. young people) pay more than they consume for as long as possible to offset this problem.
If the gov’t wants to encourage them by giving them a tax deduction or tax credit, no problem. If the gov’t wants to punish them by fining them for not buying what the gov’t deems the proper amount of insurance, problem.
July 21, 2010, 3:22 amscattergood says:
Right, so if the gov’t takes 25% of your income because your name is Chris, that’s an Income Tax? It’s a tax on your name not a tax on your income.
Sophistry is great isn’t it?
July 21, 2010, 3:29 amPES says:
No, penalty doesn’t apply to you, because your income is below the poverty line.
July 21, 2010, 4:17 amJoe says:
The tax is not an excise tax, and it could not be a constitutional excise tax because it is not uniform.
The same rules apply to all, no region in particular having to follow a special rule. It is therefore “uniform.”
The tax is not an income tax, and it could not be a constitutional income tax, because it is not a tax on derived income.
I don’t see a “derived” income provision in the 16A. And, it is directly tied to the income of the person paying the tax. In general:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1584044
July 21, 2010, 11:18 am