Archive | Taxing and Spending Clause

House Tax bleg

In July 1798, Congress enacted a direct tax to raise revenue for national defense against France. The “House Tax” imposed taxes on land, houses, and slaves. As required by Article I, section 9, clause 4 of the Constitution, this direct tax was apportioned by state population. Fries’s Rebellion, which was eventually suppressed by President Adams, involved violent resistance to this tax, based on the claim that the tax was unconstitutional. Because the direct tax was properly apportioned, it seems perfectly constitutional to me. Does anyone know the specifics of the constitutional objection to the House Tax? [...]

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Jonathan Rauch on the Individual Mandate Case

In general, I am a big fan of the work of columnist Jonathan Rauch. Unfortunately, his recent column on the individual mandate case is not one of his better pieces. The problem is not that he comes down on what I think is the wrong side of the issue, but that some of his points are factually inaccurate, while others ignore major counterarguments. Rauch claims that “no one disputes that the so-called mandate would be constitutional if you relabeled it as a tax,” that the case against the mandate is inconsistent with “conservatives'” previous opposition to judicial “activism,” and that, if the Court strikes down the mandate it will lead to socialized medicine.

Rauch’s tax point is factually wrong. The opponents of the mandate have consistently argued that the mandate is a penalty, not a tax, for reasons that go beyond labeling. I summarize that argument here:

As recently as 1996, the Supreme Court reiterated the crucial distinction between a penalty and a tax. It ruled that “[a] tax is a pecuniary burden laid upon individuals or property for the purpose of supporting the Government,” while a penalty is “an exaction imposed by statute as punishment for an unlawful act” or – as in the case of the individual mandate – an unlawful omission. The individual mandate is a clear example of a penalty, where Congress requires people to purchase health insurance, and then punishes them with a fine if they fail to comply.

In September 2009, President Obama himself noted that “for us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase.” He was right. If the mandate qualifies as a tax merely because it punishes violators with a fine, then Congress could require Americans to do almost

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Some Tentative Thoughts on the Medicaid Case

In all the hoopla over the individual mandate, most people (myself emphatically included) have not devoted enough attention to the other big Obamacare case before the Court: the 26 states’ challenge to to the part of the act requiring the states to massively expand Medicaid coverage (covering every non-elderly with an income up to 138% of the poverty line) or face the loss of all their federal Medicaid funds. Medicaid is a huge program that represents some 40% of all federal grants to state governments, according to the states’ brief. In cases such as South Dakota v. Dole, the Supreme Court has ruled that Congress has very broad discretion in imposing conditions on spending grants offered to states, but also warned that such conditions are unconstitutional if they are so onerous as to be “coercive.” What qualifies as “coercion” in this context? The Court has never favored us with an explanation, and the whole concept is murky at best.

In this case, the states’ strongest argument is that, if anything is “coercive,” it’s the threat of withdrawing such a massive proportion of all their federal funds, especially after the states have become dependent on Medicaid grants over a period of many years. If this isn’t coercion through funding conditions, it’ hard to see what is. On the other hand, as the federal government points out, it’s hard to draw a clear line here. And, if the states wanted to avoid dependency, they could simply have refused to participate in Medicaid in the first place.

My interpretation of yesterday’s Medicaid oral argument is that there probably aren’t five votes to overturn this part of the law. The liberal justices strongly support the federal government’s position, while several of the conservatives are at the very least on the fence. I [...]

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More Bad News for the Federal Government’s Argument that the Individual Mandate is a Tax

Yesterday, I pointed out that even many of the liberal Supreme Court justices were skeptical of arguments that the individual mandate qualifies as a tax under the Anti-Injunction Act, and suggested that this was not a good sign for the federal government’s claim that the mandate is a tax authorized by the Tax Clause of the Constitution.

Today’s oral argument directly considered the constitutional tax issue, and at least three of the four liberal justices – Ruth Bader Ginsburg, Elena Kagan, and Sonia Sotomayor – remain skeptical. Sotomayor suggested that the government’s Tax Clause argument is flawed because it has no “limiting principle.” Ginsburg again contended that the mandate is not a tax because it isn’t a “revenue-raising” measure. And Kagan pressed the Solicitor General on why it should be considered “irrelevant” that “Congress determinedly said, this is not a tax.” Needless to say, the conservative justices were no more supportive of the federal government’s Tax Clause claim than the liberals.

I don’t know who is going to win on the Commerce Clause and Necessary and Proper Clause questions. The plaintiffs’ position is looking pretty good. Still, I would not be surprised if the federal government managed to pull it out. But I am now quite confident that the feds are not going to prevail on the Tax Clause.

If Kagan and Sotomayor do end up concluding that the mandate is not a tax, that will be consistent with the views of the president who appointed them. [...]

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Justices Skeptical of Claims that the Individual Mandate is a Tax

Today’s Supreme Court oral argument transcript suggests that many of the justices, including at least three of the liberals, are skeptical of claims that the individual mandate is a tax. This is important not only for today’s argument about the applicability of the Anti-Injunction Act (which probably does not apply if the mandate penalty is not a tax), but to tomorrow’s argument about the constitutionality of the mandate. The federal government has argued that the mandate is constitutional because it is an exercise of Congress’ power under the Tax Clause. Lower courts have almost uniformly rejected this constitutional tax argument, and today’s questioning suggests that the Supreme Court is unlikely to accept it either.

Justice Stephen Breyer suggested that the mandate is not a tax because “Congress has nowhere used the word “‘tax.'” Justice Ginsburg noted that the mandate may not be a tax because it isn’t a “revenue-raising measure,” and because the monetary penalty is separable from the mandate itself. Justice Sotomayor also expressed doubts about whether the mandate is a tax, as did several for the conservative justices. As far as I can tell, none of the justices seemed to support the argument that the mandate is a tax.

Thus, today’s events do not bode well for the federal government’s constitutional tax argument. However, there are two caveats to this conjecture. First, the justices sometimes ask questions for rhetorical effect or play devil’s advocate. I don’t think they are doing so here, but obviously I can’t be sure. Second, it is theoretically possible that the constitutional definition of what qualifies as a “tax” is broader than the AIA definition. This is not the usual view of the matter. Indeed, the one lower court that ruled that the AIA applies to this case did so precisely because they thought [...]

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My CNN Column on the Individual Mandate Case

The CNN website has just posted a column I wrote on the individual mandate case. Here’s an excerpt:

This week, the U.S. Supreme Court considers the case challenging the Obama administration health care plan’s requirement that most Americans purchase a government-approved health insurance plan by 2014. The court should rule that this individual mandate is unconstitutional. To do otherwise would give Congress almost unlimited power….

If Congress could use [the commerce] clause to regulate mere failure to buy a product on the grounds that such inaction has an economic effect, there would be no structural limits to its power. Any decision to do anything is necessarily a decision not to do something else that might have an economic effect. If I spend an hour sleeping, I thereby choose not to spend it working or shopping. As the lower court decision in this case explained, the government’s position “amounts to an argument that the mere fact of an individual’s existence substantially affects interstate commerce, and therefore Congress may regulate them at every point of their life.”

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Upcoming Appearance on C-SPAN’s Washington Journal

For readers who may be interested, I will be on C-SPAN’s Washington Journal from 8 to 8:30 AM tomorrow to talk about the upcoming Supreme Court oral argument on the Anti-Injunction Act, and whether or not it precludes the individual mandate lawsuit. The AIA issue is somewhat technical. But it does tie in to one of the key constitutional questions at stake in overall individual mandate litigation: whether the mandate is constitutional because it is actually a tax. Although the Fourth Circuit ruled otherwise, most lower courts have concluded that the AIA does not apply to the anti-mandate lawsuits because the mandate is not a tax as that term is defined in the Constitution.

I might have instead appeared on Washington Journal on Tuesday to talk about the main individual mandate oral argument. But unfortunately I will be at an international academic conference in Montreal that day – ironically a conference focused on the question of whether judicial review in federal systems promotes nationalization or decentralization. [...]

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Obamacare in Wonderland

That’s the title of a new article by Gary Lawson and me, forthcoming in a symposium issue of Boston University’s American Journal of Law & Medicine. The Journal has a large readership among medical professionals who are interested in legal issues relating to medicine. Accordingly, if you have been following the VC’s debate on the ACA over the past couple years, most of what is in the article will already be familiar to you. Here is the abstract:

The question whether the Patient Protection and Affordable Care Act (“PPACA”) is “unconstitutional” is thorny, not simply because it presents intriguing issues of interpretation but also because it starkly illustrates the ambiguity that often accompanies the word “unconstitutional.” The term can be, and often is, used to mean a wide range of things, from inconsistency with the Constitution’s text to inconsistency with a set of policy preferences. In this article, we briefly explore the range of meanings that attach to the term “unconstitutional,” as well as the problem of determining the “constitutionality” of a lengthy statute when only some portions of the statute are challenged. We then, using “unconstitutional” to mean” inconsistent with an original social understanding of the Constitution’s text (with a bit of a nod to judicial precedents),” show that the individual mandate in the PPACA is not authorized by the federal taxing power, the federal commerce power, or the Necessary and Proper Clause and is therefore unconstitutional.


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Supreme Court: “Obviously, direct control of medical practice in the states is beyond the power of the federal government.”

So said the unanimous Supreme Court in United States v. Linder, 268 U.S. 5 (1925). The opinion was written by McReynolds, and joined by the progressive Justices Brandeis and Holmes, along with the rest of the Court.

At issue was the federal Harrison Anti-Narcotic Law, which taxed opium and coca leaves, and their derivatives. Ostensibly as part of the tax scheme, the Act also required registration of those drugs. A physician lawfully dispensed one tablet of morphine and three tablets of cocaine to a female patient who was an addict. The trial court instructed the jury that Dr. Linder’s actions would be lawful if the drugs were dispensed as painkillers for stomach cancer or an ulcer, but not simply because the patient was an addict. As the Supreme Court observed, the indictment “does not question the doctor’s good faith nor the wisdom or propriety of his action according to medical standards. It does not allege that he dispensed the drugs otherwise than to a patient in the course of his professional practice or for other than medical purposes. The facts disclosed indicate no conscious design to violate the law, no cause to suspect that the recipient intended to sell or otherwise dispose of the drugs, and no real probability that she would not consume them.”

The Court pointed out that “Congress cannot, under the pretext of executing delegated power [here, the Tax Power], pass laws for the accomplishment of objects not intrusted to the federal government. And we accept as established doctrine that any provision of an act of Congress ostensibly enacted under power granted by the Constitution, not naturally and reasonably adapted to the effective exercise of such power, but solely to the achievement of something plainly within power reserved to the states, is invalid and cannot be [...]

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Federal District Court in Pennsylvania Strikes Down Individual Mandate

Federal district Judge Christopher Connor of the Middle District of Pennsylvania just issued an opinion striking down Obama health care plan individual mandate. It is available here. Timothy Sandefur has some helpful commentary on the decision here. As Sandefur mentions, Connor’s opinion is unusual for striking down the mandate despite rejecting the view that upholding it would give Congress unlimited authority to enact other mandates. My own view is that upholding the mandate would indeed lead to an unconstrained slippery slope of this kind, as I explained here. On the important severability question, Connor argues that the preexisting conditions coverage requirement cannot be severed from the mandate, but that the rest of the bill can be.

We now have three district courts and one court of appeals that have voted to strike down the mandate, and three district courts and one court of appeals that have voted to uphold it. Of the twelve federal judges who have considered the question, six have gone one way and six the other, with ten of the twelve (including Judge Connor) splitting along partisan and ideological lines.

It is now more clear than ever that there is no expert consensus on this subject, and that this is not a frivolous case that only ignorant or misguided extremists could possibly support.

UPDATE: The court in question is actually the Middle District of Pennsylvania, not the Eastern District, as I originally stated in the post. I apologize for the error, which has now been corrected. [...]

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Fourth Circuit Dismisses Two Challenges to the Individual Mandate on Jurisdictional Grounds

On Thursday, the Fourth Circuit Court of Appeals issued two decisions dismissing challenges to the Obama health care plan’s individual mandate on jurisdictional grounds. All three judges on the panel were Democratic appointees, including two chosen by President ObamaNeither ruling reached the merits of the question of whether the individual mandate is constitutional. Virginia v. Sibelius is by far the better known case, because it was brought by the Virginia state government. But Liberty University v. Geithner is perhaps more interesting.

In the Virginia case, the Fourth Circuit dismissed Virginia’s challenge to the mandate because they ruled that the state lacked standing to challenge it. Virginia had based its standing on argument on the grounds that it had passed a state law exempting Virginians from being forced to buy health insurance. Normally, states automatically have standing to challenge federal laws that supersede their own legislation. But the Fourth Circuit ruled that the Virginia law was not a genuine exercise of state sovereignty, but merely a symbolic protest against the federal individual mandate. In my view, Virginia’s motives for passing the law should have been irrelevant to the question of how it affected standing. Moreover, a decision not to regulate is just as much an exercise of sovereign authority as a decision to impose a regulation. In addition, I think Virginia should also have gotten standing on entirely unrelated grounds. It could have taken advantage of the “special solicitude” for state governments that the Supreme Court established in Massachusetts v. EPA. Virginia probably erred in putting all of its standing eggs in one basket. It should have emphasized Massachusetts v. EPA as well as its anti-mandate law.

Be that as it may, this decision is unlikely to matter much in the long run. Even if the Supreme Court also [...]

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My RegBlog Post on the 11th Circuit Individual Mandate Decision

My RegBlog post on the 11th Circuit’s recent decision striking down the individual mandate is now available here. The post considers the the ruling in more detail than my previous commentary on the subject.

RegBlog is a relatively new website established by the University of Pennsylvania Program on Regulation. For VC readers who may be interested, it has lots of good commentary by scholars and public officials on a variety of regulatory issues. [...]

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My Newsday Op Ed on the 11th Circuit Individual Mandate Decision

Newsday has published an op ed I wrote on the 11th Circuit decision striking down the individual mandate. Because of very tight space constraints, I was unable to cover many of the nuances of the decision. But the op ed does summarize my main thoughts on it:

Last week’s Eleventh Circuit Court of Appeals decision striking down the individual mandate in President Barack Obama’s health care plan is an important milestone. The court correctly recognized that there is no way to uphold the mandate without giving Congress unlimited power to mandate anything….

The ruling was co-authored by Judge Frank Hull, who became the first Democratic judge to vote to strike down the mandate. This undercuts already dubious claims that the lawsuits are frivolous; her opinion signals that the arguments against the mandate are strong enough to persuade at least one appellate judge likely to favor it on political grounds.

Since another federal appellate court, the Sixth Circuit, recently upheld the law, it’s extremely likely that the Supreme Court will decide to hear the case within the next year….

Defenders of the mandate claim this is a special case because everyone eventually uses health care at some point. But the argument relies on shifting the focus from health insurance to health care. The same bait-and-switch tactic can justify any other mandate.

For example, not everyone eats broccoli. But everyone does participate in the market for food. Therefore, a mandate requiring everyone to purchase and eat broccoli would be permissible under the federal government’s logic, as would any other purchase requirement. As the Eleventh Circuit puts it, “the government’s position amounts to an argument that the mere fact of an individual’s existence substantially affects interstate commerce, and therefore Congress may regulate them at every point of their life.” Whatever we do, we

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My SCOTUSblog Post on the Future of the Individual Mandate Litigation

SCOTUSblog has just posted my contribution to their symposium on the individual mandate litigation. I interpreted the assignment as focusing primarily on the future prospects of the individual mandate challenges, rather than on the question of whether they deserve to win. So I focused primarily on the former question, even though some other participants in the symposium seem to have concentrated more on the latter. For those interested in my take on the normative question, I summarized it here. Here’s an excerpt from the SCOTUSblog post:

The Supreme Court may hear at least one of the cases challenging the constitutionality of the Obama health care bill’s individual mandate sometime during the next year. If it does, the result will have major implications for our system of constitutional federalism. If the federal government prevails, Congress is likely to have an unlimited power to impose mandates of any kind. If the plaintiffs win, the Court will have reaffirmed the importance of constitutional limits on federal power….

Every judge who has ruled on the issue has recognized that Congress has never previously imposed a comparably sweeping mandate under the Commerce Clause, and that the Supreme Court has never ruled on the issue of whether Congress has a general power to regulate inactivity. Given the deep ideological divisions over the case and the lack of precedent clearly on point, the Court could easily rule either way.

Nonetheless, the federal government probably has a better chance than the plaintiffs. The Court’s four most liberal Justices have consistently refused to recognize any meaningful limits on Congress’s powers under the Commerce Clause. Thus, the mandate will be upheld if even one of the five conservatives votes in its favor. And the conservatives have often been a fractious bunch in federalism cases….

At the same time, it

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