A good comment on the "tax" in health law

Those who deny that the so-called “mandate” (in reality the “minimum essential coverage” requirement) is a tax are ignoring the actual provisions of the law. It is a tax, and an income tax, at that. The “minimum essential coverage” requirement is part of the Internal Revenue Code (see 26 U.S.C. Sec. 500)A). Failure to maintain “minimum essential coverage” subjects an income taxpayer to a “penalty” as measured by taxable income. The amount of the “penalty” rises from $95 per year in 2014 to $750 after 2016, but there is no “penalty” if the amount exceeds eight percent of a taxpayer’s household income, and no “penalty” if a taxpayer’s household income is under 100 percent of the poverty line. If a “penalty” is payable, it is paid with the taxpayer’s income tax return. As Charles Fried pointed out in his Senate testimony, there is no “minimum essential coverage” requirement (i.e., no “mandate”) for individuals who have no taxable income. The requirement arises only when the individual receives taxable income. The law explicitly provides that no other enforcement can be used to collect the “penalty”–no criminal prosecution or fines and no liens or levies. In other words, it can only be collected as part of the individual’s income tax obligation, and it can only be paid on the individual’s income tax return. It is a tax, and an income tax, at that.

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We can add that it is quite possible that a "penalty" can be passed in the form of a "tax," particularly since the tax power is not merely to add money to the treasury alone:

The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States

Thus, as Madison once noted, a protectionist tariff is constitutional, even though the obvious point of the measure, a "tax," is not to provide money for the treasury.* One means to determine taxation is to determine if someone did something or not. That is to "penalize" them in some sense, but not in the criminal or civil penalty sense [what is the burden of proof here? does it have to meet Eighth Amendment limts as a "fine"?]. There is no apparent convincing reason why this is not true.

A fine is an allowable means to further the Commerce Power, but still, there is no reason to assume this is a fine. Again, I find this (updated) a good quick rejoinder as well, including the interesting reminder that health insurance has been a tax deduction for quite some time.

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* This is clear precedent:

First. It is beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed. Sonzinsky v. United States, 300 U.S. 506, 513 -514 (1937). The principle applies even though the revenue obtained is obviously negligible, Sonzinsky v. United States, supra, or the revenue purpose of the tax may be secondary, Hampton & Co. v. United States, 276 U.S. 394 (1928). Nor does a tax statute necessarily fall because it touches on activities which Congress might not otherwise regulate.

I left the citations in since it underlines the principle is not some post-New Deal gloss, but supported by the conservatives of an earlier era. The excerpt is followed by a statement by one such conservative justice that the principle was applied from the beginning of history.

An earlier precedent from the Lochner Era is sometimes cited. Putting aside its questionable force at this point (see, e.g., F12 here), even that opinion spoke of a clear intent to "declare that the employment within the mentioned ages is illegal." The added matter that it seemed to be a way to avoid an earlier ruling (Congress regulating child labor) clearly influenced the result. If the requirement here is equally unconstitutional on Commerce Clause grounds, that might be relevant. All the same, a ten percent net profit tax amounting to $6,312.79 at that time [1922] is a matter of different degree than the fraction of that in current dollars at issue here.

A person can easily pay the $695 or such (the poverty line limit deals with those clearly unable to pay, subsidies helping here too) so arguing the law is in effect making not buying insurance "illegal" is a reach. Again, it is not merely "regulatory" but provides money for the treasury. Quite true it is largely regulatory. Only a very selective picking and choosing of choice quotes will lead you to find this a problem. But, those who aim to make "inactivity" a rule don't need much, do they.

One more thing. Another reason not to consider this a "fine" is because that has no "criminal" connotation. The comment above underlines the collection of the money is limited to the tax system. "Fines" are collected in various ways. Also, the Supreme Court has noted that something with a clear "criminal" motivation cannot be relabeled a "tax." The ruling there cites a case often cited by the anti side, La Franca, but said case rests on just that principle. Again, not buying insurance is not "illegal." It is just one of many things that will entail a higher tax burden.

[Footnote added]