Earlier this week, James Taranto of Best of the Web (which I faithfully read every day) disparaged the challenge to Obamacare being brought by the Pacific Legal Foundation, a challenge that is based on the fact that the “tax” in the Affordable Care Act did not originate in the House as seems to be required by the Constitution. Yesterday, Tim Sandefur, attorney for PLF (and author of The Right to Earn a Living), responded on its blog with this post: Will the courts enforce the Origination Clause against Obamacare? After candidly admitting that the challenge is an uphill battle, Sandefur offers the following legal analysis:
Taranto’s right that the Supreme Court has distinguished taxes that are “bills for raising revenue” and uses of the tax power that are something else—“penalty assessments” or “fines” used to enforce compliance with a law passed under one of Congress’ enumerated powers. The Constitution’s limits on the taxing power don’t apply to the latter. In Munoz-Flores, the Court upheld a penalty that convicted criminals were forced to pay into a special “victims’ compensation” fund, because that was not a bill for raising revenue—it was an assessment used to enforce compliance with a federal criminal law. In Millard v. Roberts, what looked like a tax was actually a financial penalty used to enforce compliance with a law regulating railroads, which was passed under Congress’ enumerated power to govern the District of Columbia. Courts of Appeals have upheld similar financial penalties used to enforce compliance with regulations of interstate commerce. At first, the Obamacare penalty looks a lot like this.
Yet the NFIB decision said no. There, the majority ruled that the Individual Mandate is only a tax, passed solely on the basis of Congress’ taxing power, and not a penalty used to enforce compliance with a regulation of commerce. The exaction “may for constitutional purposes be considered a tax, not a penalty,” the Court said. “[U]nlike the ‘prohibitory’ financial punishment inDrexel Furniture,” a person may make a “reasonable financial decision to make the payment rather than purchase insurance.” Second, the law doesn’t require any kind of mental state—it doesn’t assess a person’s wrongfulness—it just requires a person to pay. Third, the IRS “is notallowed to use those means most suggestive of a punitive sanction” in order to enforce the exaction. For these reasons, the Court said the Obamacare tax was the reverse of the penalty in the Drexel Furniture case, which though calling itself a tax was actually a penalty for enforcing compliance with a regulation of commerce. Here, what called itself a penalty was actually only a tax. Obviously it was meant (unjustly) to make people buy insurance against their will, but that “does not mean that it cannot be a valid exercise of the taxing power…. It suggests instead that the shared responsibility payment merely imposes a tax citizens may lawfully choose to pay in lieu of buying health insurance.” Whatever one thinks of this, we have to take the Court at its word: the law is only a tax. And the justices went on to determine whether it was an unconstitutional direct tax, which they would not have done if the tax were only being used to enforce compliance with a regulatory scheme: “Even if the taxing power enables Congress to impose a tax on not obtaining health insurance, any tax must still comply with other requirements in the Constitution.”
Contrast that with the Fourth Circuit’s decision in Rodgers v. United States, a follow-up to the infamous Wickard v. Fillburn. There, the farmer argued that the fee for growing too much wheat was an unconstitutional direct tax. The court ruled it was not, because it was really not a tax—only an “imposition of sanctions by the Congress under the commerce clause.” Since the Constitution’s various limits on the taxing power “relate solely to taxation generally for the purpose of revenue only, and not impositions made incidentally under the commerce clause,” the penalty wasn’t subject to the constitutional restrictions on the taxing power.
So while Taranto is right that the Court has created two categories of monetary exactions—those that are bills for raising revenue and those that exist just to enforce compliance with some other law—the NFIB decision places the Obamacare exaction squarely in the former and not in the latter category. And the exception to the Origination Clause that the cases have established applies only to the latter. Taranto writes that it’s “far from clear that ObamaCare was a ‘Bill for raising Revenue,’ since its main purpose was to remake the health insurance market,” but Congress can “remake the market” either through a Commerce Clause enactment and associated penalties, which are not subject to the Origination Clause, or through a tax itself—which is subject to the Origination Clause.
Of course, the Court could construct a new exception to the Origination Clause, which would exempt even legislation that, like the PPACA, rests solely on Congress’ power to tax. It could expand the exception to apply not just to enforcement assessments attached to Commerce Clause enactments or other enumerated powers (such as were at issue in Munoz-Flores, Rodgers, and other cases), but also to behavior-changing taxes that rest solely on the taxing power. But that really would open the door to tax-power-based government reconstructions of American society, and with minimal democratic oversight. That would be as much an unprecedented innovation in constitutional law as was the effort to expand the Commerce Clause to authorize compulsory purchases, which the NFIB majority rejected. And if the NFIB decision risks opening the door to tax-based mandates—something the Court denied—then it is all the more important that the Constitution’s democratic checks and balances over that taxing power should be enforced, not ignored. At least allow voters to control this power as the framers intended.
Again, we can’t know what the courts will do until they do it, but I hope I’ve shown why it’s worthwhile for us to litigate this case.
All of this talk could be moot, of course, if Chief Justice Roberts’ Commerce Clause opinion in NFIB is just non-binding dicta. Mr. Taranto strongly believes it isn’t, and so do I, but until the courts say so, it’s still possible that the trial judge could ignore all our tax arguments and uphold the Individual Mandate as an exercise of the Commerce Clause, on the grounds that the NFIBdecision didn’t resolve that issue one way or the other. We’ve also asked the court to clarify this point, which is another reason our case is important.
Finally, keep in mind that ours is only one of several challenges to Obamacare still being litigated. There’s the Oklahoma case challenging Obamacare exchanges, the Arizona case challenging IPAB, and the cases challenging the contraception mandate, and probably others. At the same time, states are refusing to collaborate with the Obamacare mandate by declining to establish exchanges. All of this is critical to keeping open the possibility of market-based health insurance reform and strengthening resistance against the ultimate government takeover of medicine. We know this is a hard case to win. But so was the NFIB case, and so is every case seeking to rescue liberty from the ever-growing regulatory welfare state. We cannot succeed if we do not make the effort.