PPACA and Taxes

Lyle Denniston talks about the "tax penalty" aspects of the PPACA in his latest in the series on the case. I continue to read the senior Supreme Court journalist's posts with some um dissenting thoughts.

We first read:

The Administration actually considers that tax liability not to be a tax, after all. It persuaded Congress to refer to it, most of the time, as “a penalty” and that label has stuck — except in the legal debate, when the provision again is sometimes called a tax. After all, for those who will owe it, they will pay it to the Internal Revenue Service, along with their federal tax return. What is going on here?

Yes, what is going on? Well, later on, we do read that at first the Administration argued that a law addressing "tax" suits barred litigation on the "mandate" (yesterday, I linked to an essay that reasonably argues otherwise, but not on the ground that it isn't a tax) but changed its mind after repeatedly losing on the point. Also, there are pragmatic and political reasons for them to want the issue to be decided now. Again, the cited essay provides a way to do that and not pretend a tax is not at issue here.

It is curious that a provision regarding money a "taxpayer" (to cite the article) to be "paid with a federal tax return" is not really a tax. But, the article notes the 11th Cir. held that the federal courts so far "have spoken with clarion uniformity" on the point, so it is "doubtful" that the measure would survive if the Commerce Clause grounds are rejected. For some reason, the Fourth Circuit ruling that struck down the suit on standing grounds via the Anti-Injunction Act (regarding taxpayer suits) was not mentioned. Nor the judges who thought it a 'tax' or the chance that the USSC might disagree (as they sometimes do) with the holdings of a few courts on a certain point. But, Judge Sutton wrote:

It is easy to envision a system of national health care, including one with a minimum-essential-coverage provision, permissibly premised on the taxing power. Congress might have raised taxes on everyone in an amount equal to the current penalty, then offered credits to those with minimum essential insurance. Or it might have imposed a lower tax rate on people with health insurance than those without it. But Congress did neither of these things, and that makes a difference.” Congress adopted the mandate and penalty in their present form, the judge concluded, “to change individual behavior,” not to raise money for the Treasury’s coffers.

If we are going to cite a non-binding concurring opinion, why not cite another that argued that the provision on the ground it is a tax? The opinion in part referenced precedent that held that: "To determine whether an exaction constitutes a tax, the Supreme Court has instructed us to look not at what an exaction is called but instead at what it does." This belies the insistence that we must take politicians at their word -- if they say they aren't raising "taxes," well darn, they aren't! If a bird looking animal quacks, it is a rabbit -- after all Congress and the President said so. Well, sometimes. When not talking about "taxpayers" and "tax penalties" and requiring money from people on April 15th.

But, what about the fact the money is intended to pressure people to change behavior? As the article notes:

Congress did not adopt the ACA penalty to raise money, even though it might bring in an estimated $4 billion a year, according to the Congressional Budget Office, and could ultimately be paid by as many as 4 million Americans.

A nice bunch of change. Not a tax though! Well. The money does in fact raise revenue. Let's say the revenue has a primary purpose to influence behavior. So what? The Constitution is pretty clear on the point:

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;

Let's say a "tax" is something that raises revenue in a tax-like way (to my knowledge, the Supreme Court, particularly in recent years, has not defined the term narrowly, though some might want to try). This provision seems to meet this colloquial test. A plain vanilla "fine" is not something that is collected in this fashion, down to relying on income as a test on determining the amount. So, we are left to see what it does. And, the Constitution underlines taxes are not just to serve as revenue. The article itself suggests as much by saying that is a primary purpose of taxation. But, lots of taxes are for other reasons. For better or worse, the tax code is used to encourage and discourage various behaviors.

A major end of the legislation is to promote the "general welfare" by expanding those with health insurance. It also does so by protecting a national industry (health insurance and health in general) pursuant to the Commerce Clause. Taxes is one way to advance the various powers enumerated by Congress. As with rights (e.g., religious liberty including religious speech), powers often are interlocked, no need to rely on one or the other to uphold certain regulations. The Commerce Clause (or CC + Necessary and Proper Clause) argument might be stronger as a whole, though I think that might be debated, but quite honestly, I think the means used here includes a "tax." Words do matter. So do the meanings of acts. There is a way to get around the taxpayer anti-injunction statute and not add fuel to this sophistry. If the Court wants to be vague about it or leave the question, fine, and ultimately it is about upholding the law. But, not calling this a "tax" to me is dumb.

I readily admit that the "tax" aspect of the legislation, helped by the Administration itself begging off on it lately, has not received much love by the federal courts. There is some support there, as noted above (one judge specifically relied on it, the 4th Circuit at least relied on it being enough of a "tax" for the injunction law to kick in and a third in dissent also agreed with the 4th Cir. while providing some help to those making a full fledged tax argument). Not quite seeing the "clarion uniformity."