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With Unlimited Taxing Authority, Who Needs the Commerce Clause?

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July 2nd, 2012

(Article first published as With Unlimited Taxing Authority, Who Needs the Commerce Clause? on Blogcritics.) In a decision with so many moving parts that Rube Goldberg would be envious, the U.S. Supreme Court last week upheld ObamaCare’s individual mandate. Writing for a majority of the Court, Chief Justice John Roberts concluded that the mandate is a tax rather than a penalty. As a tax it passes constitutional muster. As a penalty it does not. ObamaCare’s Medicaid expansion provision did not fare as well. The Court struck down as unconstitutional Congress’s attempt to force states to provide significantly increased coverage or lose all federal Medicaid funding.

In the wake of the Medicaid ruling, states have begun to opt out of providing the additional coverage. The absence of state participation will necessarily impact the precarious payment formula for the costly health care package. The extent remains to be seen.

So far, most of the media attention surrounding the Court’s decision has centered on its political implications in this election year. ObamaCare is an unpopular law made even more so last Thursday when the scarlet “T” was emblazoned on its virtual forehead. Recognizing the downside of having passed the single biggest tax increase in American history, the White House continues to mischaracterize the mandate as a penalty.

Beyond the persistent mislabeling, Obama’s primary argument in favor of his signature piece of legislation is a variation of Nancy Pelosi’s failed rallying cry. Back in 2010 the former Speaker stated, “we’ll have to pass the health care bill so that you can find out what is in it”. Obama has turned that into “you’ll love it when you understand it”. Nancy’s spiel didn’t sell two years ago and the President’s won’t do any better now.

Recognizing the riskiness of the recast wait-and-see pitch, the Administration has a third response to ObamaCare critics. The legislation is not an issue in this election because Romney successfully pushed universal healthcare, including an individual mandate, as Governor of Massachusetts. The theory here is that two wrongs cancel each other out as if neither happened so there’s nothing to talk about.

It is way past time to point out the fundamental flaw in Obama’s “Romney did it, too” dismissal. Namely, a state deciding to implement universal health care for its citizens is not the same thing as the federal government forcing it on all states and their citizens. It’s a little matter of states’ rights versus the overreaching of Congress in attempting to dictate the intricacies of life from afar. As the Medicaid expansion ruling points out, Congress is not in the business of being in our business in all places or at all times.

But, the most far-reaching effect of the Supreme Court’s ObamaCare ruling is not the impact on this year’s election. The response in the voting booth this fall will prove much less important than the Court’s unlimited expansion of Congress’s taxing authority. In pronouncing the individual mandate a tax rather than a penalty, the Court’s majority argued speciously and in a marked departure from previous case law. The ruling did strike down the Administration’s Commerce Clause claim of authority. But, that matters not at all when the power to tax is unrestrained.

Joined by Justices Ginsberg, Breyer, Sotomayor and Kagan, Chief Justice Roberts used a 90-year old, infrequently cited, case as his only stake in the ground. Bailey v. Drexel Furniture Co., 259 U.S. 20 (1922), a child labor law decision, declared a Congressionally defined tax to be a penalty and invalidated it. In changing the characterization of the tax to that of penalty, the Drexel Furniture case employed three factors: (1) whether the financial burden is heavy, (2) whether its imposition requires the intent to misbehave and (3) the nature of the government agency charged with enforcement.

Applying these considerations, the ObamaCare Court found that the mandate is a lesser financial burden than purchasing health care insurance. It requires no bad intent on the part of those who must pay it. And, it is enforced by the IRS not the FBI or other law enforcement agency. According to the Court’s majority, these circumstances, taken together, point to the mandate as being a tax rather than a penalty. But, according to the four dissenting justices, this conclusion is spurious, ignores decades of High Court opinions and impermissibly denies Congressional intent.

Justices Scalia, Kennedy, Thomas and Alito make compelling arguments as they strip away the logical veneer from the majority’s legal constructs. Citing dozens of cases and statutes, the dissenters point out that the amount of the levy is inconsequential as is the fact that it is income-based. While the requirement of intent does point to a penalty, its absence does not suggest a tax. And, finally, the IRS collects penalties as a routine part of its charter.

Even with the strength of this portion of the dissent’s rejoinder, there are two arguments of greater persuasive force against the mandate as a tax. The first is also found in the dissent. The other is mentioned, and dismissed, almost as an afterthought by the Chief Justice.

The dissent’s most profound counter argument is that the decision usurps the federal taxing authority reserved by the constitution to Congress alone. Not only does ObamaCare refer to the mandate as a penalty in eighteen separate places, Congress explicitly rejected the idea of it being a tax. An early draft of the legislation did label the mandate a tax. But, that characterization was changed to one of penalty in later versions and in the final version. With all of the horse trading that was required to barely pass the legislation, branding it a tax would have sounded the death knell.

So, the Court’s mandate-as-tax is not merely the strained interpretation of a statute in order to save it, which is permitted. It is an intrinsic re-write of the statute turning it into something other than Congress intended. As such, it amounts to judicial legislation, which is not permitted. And it means that the Court has morphed itself into the tax-levying branch of government, which also is not permitted.

Perhaps the most potent argument against the mandate ruling is that the Court’s tax applies to acts of omission rather than commission. While the majority found this dichotomy fatal to the application of the Commerce Clause, it had no trouble decreeing it under Congress’s taxing authority.

At the end of the mandate discussion, Chief Justice Roberts touches upon the tax omission/commission conflict. He makes three feeble arguments for allowing Congress to tax acts of omission while placing no limitations on the type of omissions that may be taxed. The ruling is a stunning no-holds-barred grant of authority that permits Congress to compel personal behavior of any kind. Against that panorama of power, the Commerce Clause is but drab window dressing.

One can only hope that a future Supreme Court decision, like the election results this fall, will restore sanity to our federal branches of government.

See you on the left-side.


 





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