ACA Supporters Must Admit That They Are Taxing the Uninsured

Is Obamacare enforced by a tax or a penalty? In the Supreme Court, the Obama Administration claimed that the “penalty” enforcing the individual responsibility requirement was a tax.  Proposals by anxious Democrat Senators, many in vulnerable seats, to delay the enforcement of the Affordable Care Act presents a golden opportunity for the government to finally state on the record how Obamacare works: is it a tax, or a penalty?

Tonight at 9:10pm ET on the John Batchelor Show, I will discuss Josh Blackman’s and my USA Today op-ed in which we urge Congress to either admit that Obamacare imposed a tax on the uninsured, and bear the political consequences of that decision, or reaffirm that it was a Commerce Clause penalty, in which case it is unconstitutional. Here is our conclusion:

Now, as the price for delaying the implementation of the court-created tax penalty, Republicans should demand truth in labeling. The Democrats in Congress must now admit they have imposed a tax on young and healthy Americans to get them to take the bad deal that is Obamacare. And any suspension of this tax must be scored by the Congressional Budget Office so the public knows the size of the tax increase that will be imposed on the American people when the delay ends and the tax kicks in. No longer will congressional supporters of the ACA be able to evade political responsibility.

On the other hand, if the Democrats insist that the penalty is not a tax, then they will be admitting that it is unconstitutional under the Supreme Court’s decision. If Congress contradicts what the administration told the Supreme Court, a new challenge can be brought under the precedent of NFIB v. Sebelius. The president, and those who supported this law, should now be forced to bear the political consequences of their legislative and litigation legerdemain. If Obamacare can only legally live by the tax, then its supporters in Congress must politically die by the tax.

There are important constitutional reasons for labeling this law accurately.  Five members of the Supreme Court in NFIB v. Sebelius held that a penalty that forces people to purchase health insurance is unconstitutional. The Chief Justice found that a tax on those who do not have health insurance, in contrast, would be constitutional if it is not coercive. Thus, the only way Obamacare’s constitutionality could be saved was as a tax. If it is a penalty, it would be unconstitutional.

The significance of the tax/penalty distinction will take on an even greater importance in the future when it becomes evident that the “tax” on not having insurance is too low to incentivize many to buy insurance. Inevitably, there will be efforts to increase the cost of being uninsured. There are suggestions that the Administration made the penalty low in 2010 in order to make the bill an easier sale (like the “you can keep your insurance” pitch), with the understanding that it could be raised later.  That option is no longer available because, in his opinion upholding the bulk of the ACA, Chief Justice Roberts said that the tax cannot be so high as to coerce or “mandate” anyone to buy health insurance.

For those who may argue that the Court already found that the law is a tax, and there is no reason for Congress to act on it, that is not the case.  Chief Justice Roberts only treated Obamacare as a tax for purposes of his saving construction. The reason why he needed to rewrite the law was because the actual law Congress passed was an unconstitutional penalty.

For now, any law suspending the operation of the “tax” should identify its constitutional basis.  If it is truly a penalty, then it is unconstitutional under NFIB. But if it is a tax on the uninsured, it should be scored like any other tax and those who vote for it should finally assume political responsibility for raising taxes on the uninsured.