Again, if you’re confused, you’re not alone. The mandate is not a tax when Roberts doesn’t want it to be and it is a tax when he wants it to be. That’s confounding enough. But what’s worse is that nowhere in the opinion does he state what of the three types of taxes the mandate is.
There were four issues presented for a ruling to the Supreme Court in the Obamacare case:
- Whether the Anti-Injunction Act precluded the Court from even hearing the case in the first place.
- Whether the individual mandate was a constitutional exercise of Congress’ power.
- Whether it was constitutional for the federal government to withhold all Medicaid funds from states which refused to comply with the ACA’s expansion of Medicaid.
- If any provision of the Affordable Care Act (ACA) was unconstitutional, could it be severed from the rest of the Act or must that make the entire Act unconstitutional?
Each issue will be analyzed separately. This article will discuss the first two issues presented. A soon-to-follow article will discuss the second two issues presented as well as a discussion of what this means in practical terms.
The Supreme Court ruled that the “penalty” in 26 U.S.C. Section 5000A (the individual mandate) is NOT a tax for purposes of the Anti-Injunction Act.
As the Supreme Court explained, “The Anti-Injunction Act provides that ‘no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person,’ 26 U. S. C. §7421(a), so that those subject to a tax must first pay it and then sue for a refund.” In other words, one cannot sue to prevent the imposition of tax unless and until that tax has already been levied against an individual. Only after the tax is levied and paid can an individual sue the government for a refund of the tax on the grounds that the tax is an invalid use of Congress’ taxing power. So, if the so-called “Free-Rider” provision of the ACA is in fact a tax, then any challenges to it would be premature pursuant to the Anti-Injunction Act because the “tax” in the ACA would not be levied against anyone until 2014 (Section 5000A, which contains the penalty/tax provision, does not go into effect until 2014). Therefore, any lawsuit would have been dismissed because the issue would not have been what is known as “ripe for adjudication” – that is, the plaintiff has not suffered harm or an injury and, consequently, has no standing to bring the suit (the issue of standing is explained in the next paragraph). Thus, it was necessary to determine the issue of whether the individual mandate was a tax or a penalty because if it were a tax, the Supreme Court would never have had a chance to rule on the other issues presented in the lawsuit.
A little background regarding the types of cases the federal courts (including the Supreme Court) can hear is necessary to understanding why the ruling on the Anti-Injunction Act was necessary. There are several requirements which must be met in order for a case to be heard in federal court. Preliminarily, the party bringing the lawsuit must have what is known as “standing” (a requirement set forth in Article III, Section 2, Clause 1 of the United States Constitution). In order to have standing: there must be what is called a “case on controversy” between the parties; the plaintiff must have been actually harmed or injured in some way; and the harm or injury suffered by the plaintiff must be capable of being redressed by the adjudication of the claims set forth in the lawsuit. The purpose of having these requirements is to prevent the federal courts from rendering what are known as “advisory opinions,” that is, opinions on how a lawsuit would turn out if it were to be brought. By limiting the cases which can be heard to cases in which the plaintiff meets these standing requirements, the number of cases heard in federal courts is reduced dramatically. (If there were no standing requirements, anybody could theoretically sue anybody else for anything, regardless of whether they were even affected by it.) The courts exist to settle disputes, so it makes sense there be an actual dispute before the court issues a ruling on the matter.
The Supreme Court (correctly, in my opinion) ruled that the individual mandate was NOT a tax for purposes of the Anti-Injunction Act. Because the mandate was not a tax, the Anti-Injunction Act did not prevent the Supreme Court from hearing and ruling on the rest of the issues in the case. This is the reason Part II of Roberts’ opinion (beginning on page nine) opens with the line, “[b]efore turning to the merits [of the case], we need to be sure we have the authority to do so.” After discussing the arguments for and against the penalty provisions being considered a tax for the purposes of the Anti-Injunction Act, Roberts explained (and the court held), “the Affordable Care Act does not require that the penalty for failing to comply with the individual mandate be treated as a tax for purposes of the Anti-Injunction Act. The Anti-Injunction Act therefore does not apply to this suit, and we may proceed to the merits.” It is extremely important to note here that Roberts specifically rejected the notion that because the penalty functions as a tax, it should be treated as such for purposes of the Anti-Injunction Act. (It will become obvious why after reading Roberts’ decision on the constitutionality of the individual mandate). The analysis literally turned on whether the ACA referred to the penalty as a tax. Because it did not, the Court held the Anti-Injunction Act did not apply.
To sum up this section: The Anti-Injunction Act was found to be inapplicable because even though the Court said the penalty functions as a tax, it is not a tax for purposes of whether the Anti-Injunction Act applied because the ACA does not refer to the penalty as a tax. Thus, the suit was able to proceed on the merits.
The Supreme Court Ruled that the “penalty” in 26 U.S.C. 5000A IS tax for purposes of whether the mandate is constitutional.
The most important yet illogical portion of the opinion involves the constitutionality of the individual mandate. The individual mandate found in the ACA provides that every individual must either purchase health insurance or pay what the ACA calls a penalty. The main argument set forth (by the government and most liberals) was that the mandate is constitutional under Congress’ power to regulate interstate commerce, which is found in Article I, Section 8, Clause 3 (also known as the “Commerce Clause”). The Commerce Clause reads in its entirety: “[The Congress shall have Power] To regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes.” This clause has been used to promulgate all sorts of federal legislation because various Supreme Court decisions have held that Congress has the power to regulate virtually anything which, in the aggregate, has a substantial impact on interstate commerce. Interstate commerce is exactly that: commerce that crosses state lines. Because pretty much anything can be argued to affect interstate commerce, this power of Congress has gone largely unchecked. In one absurdly backwards decision in the 1940s, the Supreme Court even went so far as to say that a farmer who grew his own wheat for his own consumption could be regulated because by not purchasing wheat on the open market, he was affecting interstate commerce. If that seems nonsensical to you, don’t worry – you’re not alone. The key takeaway from the wheat farmer case – as expansive and egregious as it was – is that the government’s power to regulate activity is nearly all-encompassing. However, it crucial to keep in mind that even in such an overreaching case, the government was only able to regulate the wheat farmer’s actual activity. It was not trying to regulate his inactivity. In fact, the government had never before tried regulating inactivity – that is, regulating individuals for not acting. In light of this, it seems rather curious that liberals so forcefully believed and argued that the commerce clause gave Congress the constitutional authority to enact the individual mandate.
Predictably, the four liberals on the Supreme Court (Elena Kagan, Sonia Sotomayor, Ruth Bader-Ginsburg, and Stephen Breyer) accepted the notion that commerce clause gave Congress the power to enact the individual mandate. Thankfully, the other five justices (John Roberts, Antonin Scalia, Clarence Thomas, Samuel Alito, and Anthony Kennedy) refused to follow suit and rejected such a frivolous argument. If they had chosen to go along with the Court’s liberal bloc, it would have been the greatest expansion of Congressional power ever realized. If the Court held that the government has the power to force individuals to act when they do not want to act, then there literally would nothing that the government could not do. That should have been the end of the individual mandate. However, there were two other arguments given in support of the individual mandate’s constitutionality: the Necessary and Proper Clause; and Congress’ taxing power.
The Necessary and Proper Clause is found in Article I, Section 8, Clause 18, and states: “[The Congress shall have Power] To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.” In other words, Congress has the constitutional authority to enact all laws which are necessary to execute its specifically enumerated powers (as set forth in the rest of the Constitution). This argument was specious at best and was not accepted by the Court’s majority. Further exploration of the necessary and proper clause does not add to one’s understanding of the Obamacare ruling and it is not necessary to go into any further detail on this particular argument because it was rejected by the Court.
The third (and least viable) argument for upholding the individual mandate is that it is allowable under Congress’ taxing power. As the dissent pointed out, this argument was rejected by every single court which heard the case. For reasons still being theorized, Chief Justice Roberts upheld the constitutionality of the individual mandate on the basis that it was a valid exercise of Congress’ power to “lay and collect taxes” (a power enumerated in Article 1, Section 8, Clause 1). Again, some background is necessary to understand why this is such a puzzling move. Congress only has the power to “lay and collect taxes” in one of three ways: capitation tax, which is essentially a “head tax,” or a tax levied upon an individual simply for existing (this is such an obscure element of the Constitution and one wrought with so much confusion that Congress hasn’t tried enacting such a tax); excise tax, which is a tax for purchasing a good or service (e.g., cigarette tax, gasoline tax – one can avoid the tax by simply refraining from purchasing the taxed good or service); and the income tax, which only became permissible when the 16th Amendment was ratified and specifically granted Congress the power to enact such a tax. Again, these are the only sources of power with which Congress may impose taxes.
As previously mentioned, Roberts found that the individual mandate was a valid exercise of Congress’ taxing power. In contorting logic, he ruled that the same individual mandate that was not a tax for purposes of the Anti-Injunction Act functioned as tax for constitutional purposes and therefore was indeed a tax, which he then said made the individual mandate constitutional. Again, if you’re confused, you’re not alone. The mandate is not a tax when Roberts doesn’t want it to be and it is a tax when he wants it to be. That’s confounding enough. But what’s worse is that nowhere in the opinion does he state what of the three types of taxes the mandate is. As discussed in the previous paragraph, the tax imposed by Congress must be one of the three enumerated types.
To sum up this section: The individual mandate was held to be a constitutional exercise of Congress’ taxing power even though Roberts never explains which of the three permissible taxes it is. The other arguments made in favor of upholding the law’s constitutionality (the commerce clause and the necessary and proper clause) were rejected by a majority of the Court.
See part II of Faust’s excellent explanation of the ruling HERE.