The Logical Flaws of the Supreme Court’s Ruling on the Affordable Care Act

US Supreme Court

Foreign Policy Journal

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I. Introduction

“An applicable individual shall … ensure that the individual … is covered under minimum essential coverage…. If an applicable individual fails to meet the requirement … there is hereby imposed a penalty….” — The Patient Protection and Affordable Care Act

On June 28, 2012, the U.S. Supreme Court decided to uphold the individual mandate to purchase health insurance in the Patient Protection and Affordable Care Act. In doing so, the Court effectively argued that the Congress has the power to force individuals to purchase health insurance under threat of penalty, which it did by construing it simply as being a matter of Congress using its constitutional authority to lay a tax on individuals who do not purchase insurance. It arrived at the judgment that the mandate is constitutional by means of deceptive legalistic arguments devoid of logical validity. An examination of the Court’s judgment is a journey down the rabbit hole, to borrow from Lewis Carroll’s Alice’s Adventures in Wonderland, which satirized the British legal system. The Court’s judgment, while logically sound in some respects, is a case study of linguistic contortionism and fallacious syllogisms when it comes to its claim that Congress may legitimately tax non-consumption. In declaring its opinion, the Court stated that it was conferring no new powers to the Congress, and yet this is patently untrue. In fact, the Supreme Court has with this decision set a dangerous precedent by acquiescing to the Congressional claim to an extraordinary new power neither authorized by the Constitution nor even contemplated by the Founders, an authoritarian power that poses a grave threat to the principles of limited government and individual liberty.

The Court’s judgment begins by pointing out the stated purposes of the Act:

In 2010, Congress enacted the Patient Protection and Affordable Care Act in order to increase the number of Americans covered by health insurance and decrease the cost of health care.[1]

In delivering the opinion of the Court, Chief Justice Roberts reviewed the enumerated powers of the Congress in the Constitution relevant to the case before them—the Commerce Clause, the Taxing Clause, and the Necessary and Proper Clause:

This case concerns two powers that the Constitution does grant the Federal Government, but which must be read carefully to avoid creating a general federal authority akin to the police power. The Constitution authorizes Congress to “regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” Art. I, §8, cl. 3….

Congress may also “lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States.” U. S. Const., Art. I, §8, cl. 1. Put simply, Congress may tax and spend….

The reach of the Federal Government’s enumerated powers is broader still because the Constitution authorizes Congress to “make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers.” Art. I, §8, cl. 18.[2]

Chief Justice Roberts briefly explained the portions of the Act relating to the mandate:

The individual mandate requires most Americans to maintain “minimum essential” health insurance coverage. 26 U.S.C. §5000A. The mandate does not apply to some individuals, such as prisoners and undocumented aliens. §5000A(d). Many individuals will receive the required coverage through their employer, or from a government pro-gram such as Medicaid or Medicare. See §5000A(f). But for individuals who are not exempt and do not receive health insurance through a third party, the means of satisfying the requirement is to purchase insurance from a private company.

Beginning in 2014, those who do not comply with the mandate must make a “[s]hared responsibility payment” to the Federal Government. §5000A(b)(1). That payment, which the Act describes as a “penalty,” is calculated as a percentage of household income, subject to a floor based on a specified dollar amount and a ceiling based on the aver-age annual premium the individual would have to pay for qualifying private health insurance. §5000A(c)….

The Act provides that the penalty will be paid to the Internal Revenue Service with an individual’s taxes, and “shall be assessed and collected in the same manner” as tax penalties, such as the penalty for claiming too large an income tax refund. 26 U. S. C. §5000A(g)(1). The Act, however, bars the IRS from using several of its normal enforcement tools, such as criminal prosecutions and levies. §5000A(g)(2). And some individuals who are subject to the mandate are nonetheless exempt from the penalty—for example, those with income below a certain threshold and members of Indian tribes. §5000A(e).[3]

II. Congress Intended the Mandate as a “Penalty” Not a “Tax”

“‘When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean—neither more nor less.’” — Humpty Dumpty in Lewis Carroll’s Through the Looking-Glass[4]

The Court next addressed the question of whether it was barred from hearing the suit under the Anti-Injunction Act on the grounds that the penalty for non-compliance with the mandate is treated under the Internal Revenue Code as a tax. The Court dismissed this argument, ruling that the Anti-Injunction Act did not apply in this case, as Chief Justice Roberts explained:

Before turning to the merits, we need to be sure we have the authority to do so. 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, whether or not such person is the person against whom such tax was assessed.” 26 U.S.C. §7421(a). This statute protects the Government’s ability to collect a consistent stream of revenue, by barring litigation to enjoin or otherwise obstruct the collection of taxes. Because of the Anti-Injunction Act, taxes can ordinarily be challenged only after they are paid, by suing for a refund. See Enochs v. Williams Packing & Nav. Co., 370 U. S. 1, 7–8 (1962)….

The Anti-Injunction Act applies to suits “for the purpose of restraining the assessment or collection of any tax.” §7421(a) (emphasis added). Congress, however, chose to describe the “[s]hared responsibility payment” imposed on those who forgo health insurance not as a “tax,” but as a “penalty.” §§5000A(b), (g)(2). There is no immediate reason to think that a statute applying to “any tax” would apply to a “penalty.”

Congress’s decision to label this exaction a “penalty” rather than a “tax” is significant because the Affordable Care Act describes many other exactions it creates as “taxes.” See Thomas More, 651 F. 3d, at 551. Where Congress uses certain language in one part of a statute and different language in another, it is generally presumed that Congress acts intentionally. See Russello v. United States, 464 U. S. 16, 23 (1983).[5]

In sum, the Court made it clear that Congress’s decision to describe the “shared responsibility payment” as a “penalty” rather than as a “tax” was purposeful. It was their clear intent to penalize individuals for not buying insurance. In fact, President Barack Obama, when selling the Act’s reforms to the public, went so far as to insist that it wasn’t a tax. He falsely claimed that it would not raise taxes, which he was able to do by defining the mandate as “absolutely not a tax increase”.[6]

The Court pointed out that the government itself “argues that §5000A(g)(1) does not direct courts to apply the Anti-Injunction Act”. The Court concluded:

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.[7]

The Court nevertheless also stated:

It is true that Congress cannot change whether an exaction is a tax or a penalty for constitutional purposes simply by describing it as one or the other.[8]

As we shall see, this caveat was necessary for the Court to conclude on one hand that is was able to hear the case because Congress intended the “shared responsibility payment” as a “penalty” while on the other that the mandate is not unconstitutional because it is “not a penalty”.

III. Congress Has No Authority to Enact the Mandate under the Commerce Clause

“The Congress shall have Power … To regulate Commerce … among the several States….” — Constitution of the United States, Article I, Section 8

The Court addressed two different arguments by which the government claimed that the mandate is constitutional. The first is that the Congress has the authority to force people to purchase insurance under the Commerce Clause, and the second that it has the authority to lay a tax on individuals who don’t buy insurance under the Taxing Clause. Notice that for all intents and purposes, it doesn’t matter which way one frames it, the consequence remains the same, which raises the question of whether it is the ends that are objectionable or only the means.

The Court correctly observed that the Congress does not have the authority under the Commerce Clause to force people to buy insurance. In delivering the Court’s opinion in this regard, Chief Justice Roberts also instructively outlined the reason the mandate was deemed by Congress to be “necessary and proper” in the first place:

In the Affordable Care Act, Congress addressed the problem of those who cannot obtain insurance coverage because of preexisting conditions or other health issues. It did so through the Act’s “guaranteed-issue” and “community-rating” provisions. These provisions together prohibit insurance companies from denying coverage to those with such conditions or charging unhealthy individuals higher premiums than healthy individuals. See §§300gg, 300gg–1, 300gg–3, 300gg–4.

The guaranteed-issue and community-rating reforms do not, however, address the issue of healthy individuals who choose not to purchase insurance to cover potential health care needs. In fact, the reforms sharply exacerbate that problem, by providing an incentive for individuals to delay purchasing health insurance until they become sick, relying on the promise of guaranteed and affordable coverage. The reforms also threaten to impose massive new costs on insurers, who are required to accept unhealthy individuals but prohibited from charging them rates necessary to pay for their coverage. This will lead insurers to significantly increase premiums on everyone. See Brief for America’s Health Insurance Plans et al. as Amici Curiaein No. 11– 393 etc. 8–9.

The individual mandate was Congress’s solution to these problems. By requiring that individuals purchase health insurance, the mandate prevents cost-shifting by those who would otherwise go without it. In addition, the mandate forces into the insurance risk pool more healthy individuals, whose premiums on average will be higher than their health care expenses. This allows insurers to subsidize the costs of covering the unhealthy individuals the reforms require them to accept. The Government claims that Congress has power under the Commerce and Necessary and Proper Clauses to enact this solution.[9]

To reiterate, the dual purpose of the Act was to increase the number of Americans who are insured and at the same time to decrease the costs of health care. The means by which Congress sought to accomplish its first goal was to further attempt to eliminate any semblance of a free market in health care by forbidding insurance providers from rejecting individuals on the basis that they have a pre-existing condition or from charging higher premiums for those with existing conditions whose care therefore comes at a higher cost. The simplistic reasoning of proponents of the Act was that this would mean more Americans would be able to get insurance. Alas, too often legislation suffers the detriment of unintended consequences, which this case illustrates perfectly.

This “solution” proposed would fundamentally change what “insurance” meant and recognizably incentivize individuals not to purchase health insurance unless and until they actually required costly health care. One may imagine the effects on the insurance industry if the government interfered in contracts by mandating that insurance providers allow people to buy fire “insurance” to recoup their losses after their houses have burned down. This obviously defeats the whole purpose of insurance, which is designed to insure against possible future needs by spreading the risk, and would instantly put these insurance companies out of business. An insurance business can only be profitable to the extent that most people pay more in than they ultimately end up needing to take back out. The “solution” of the Affordable Care Act would recognizably raise costs for insurance providers, who would then necessarily pass the increased costs on to their customers by charging higher premiums. This was not an intended consequence of the Act; however, it was a predictable and understood one. In sum, Congress’s “solution” to the problem they perceived to exist not only would likely result in fewer Americans being insured, but would increase costs for those who were—precisely the opposite results from those Congress declared it intended to produce with the Act.

But rather than recognizing the fundamental flaws in their “solution”, Congress simply decided to implement a further authoritarian “solution” by mandating that Americans purchase an insurance policy. The net effects of the Act, therefore, are that it “solves” the “problem” of having uninsured Americans by forcing them under threat of penalty to buy insurance, and the “problem” of insurance providers raising premiums by effectively forcing healthy individuals to subsidize the costs to unhealthy individuals. (There being no slight distinction between this and having a free market in which individuals not presently in need of health care may choose, voluntarily and out of their own self-interest, to purchase insurance and thus pay into a pool that pays out to those who do require it.)

The Court was careful to point out that its job was not to weigh in on the wisdom of legislation enacted by Congress, but only on whether Congress had the authority under the Constitution to enact it:

Members of this Court are vested with the authority to interpret the law; we possess neither the expertise nor the prerogative to make policy judgments. Those decisions are entrusted to our Nation’s elected leaders, who can be thrown out of office if the people disagree with them. It is not our job to protect the people from the consequences of their political choices.[10]

That is to say, it didn’t matter to the Court whether the Act offered reasonable solutions to perceived problems, whether it would produce the desired results or not, whether it was wise or not. The only question before the Court was whether it was constitutional.

Turning to the government’s argument that Congress had such authority under the Commerce Clause, the Court observed that

Congress has never attempted to rely on that power to compel individuals not engaged in commerce to purchase an unwanted product.[11]

This in itself, the Court argued, did not mean the Commerce Clause did not grant Congress the authority to do so. However, the Court rightfully observed that

The Constitution grants Congress the power to “regulate Commerce.” Art. I, §8, cl. 3 (emphasis added). The power to regulate commerce presupposes the existence of commercial activity to be regulated….

The language of the Constitution reflects the natural understanding that the power to regulate assumes there is already something to be regulated….

The individual mandate, however, does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product, on the ground that their failure to do so affects interstate commerce. Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority. Every day individuals do not do an infinite number of things. In some cases they decide not to do something; in others they simply fail to do it. Allowing Congress to justify federal regulation by pointing to the effect of inaction on commerce would bring countless decisions an individual could potentially make within the scope of federal regulation, and—under the Government’s theory—empower Congress to make those decisions for him.[12]

The Court illustrated the fallacy of the government’s argument by citing a previous case and following its invalid logic through to its absurd conclusion:

Applying the Government’s logic to the familiar case of Wickard v. Filburn shows how far that logic would carry us from the notion of a government of limited powers. In Wickard, the Court famously upheld a federal penalty imposed on a farmer for growing wheat for consumption on his own farm. 317 U. S., at 114–115, 128–129. That amount of wheat caused the farmer to exceed his quota under a program designed to support the price of wheat by limiting supply. The Court rejected the farmer’s argument that growing wheat for home consumption was beyond the reach of the commerce power. It did so on the ground that the farmer’s decision to grow wheat for his own use allowed him to avoid purchasing wheat in the market.

In other words, the Court had already upheld that the Congress has the authority under the Commerce Clause to interfere in the market by forcing farmers not to grow wheat in an attempt to keep prices higher. It is beyond the scope of this paper to delve into the questions of either the validity of the Court’s decision in that case or of the wisdom of this policy of interfering in the market for wheat. It will suffice, for our purposes here, to question the validity of the assumption that government bureaucrats know better than the market how best to price commodities, and to point out that such attempts by the government to interfere in the market and dictate what and how much farmers may or may not grow are anathema to the principles of free market capitalism and individual liberty. This does raise the question of whether such an outcome can really be what the Founders intended with Commerce Clause. But that’s a separate question from the one we are examining here, and we need not show that the Court’s decision in that case was in error to demonstrate that its determination in this one is egregiously mistaken.

Returning to the matter at hand, the Court’s argument continued:

Under Wickard it is within Congress’s power to regulate the market for wheat by supporting its price. But price can be supported by increasing demand as well as by decreasing supply. The aggregated decisions of some consumers not to purchase wheat have a substantial effect on the price of wheat, just as decisions not to purchase health insurance have on the price of insurance. Congress can therefore [according to the government’s logic] command that those not buying wheat do so, just as it argues here that it may command that those not buying health insurance do so. The farmer in Wickard was at least actively engaged in the production of wheat, and the Government could regulate that activity because of its effect on commerce. The Government’s theory here would effectively override that limitation, by establishing that individuals may be regulated under the Commerce Clause whenever enough of them are not doing something the Government would have them do.

Indeed, the Government’s logic would justify a mandatory purchase to solve almost any problem…. To consider a different example in the health care market, many Americans do not eat a balanced diet. That group makes up a larger percentage of the total population than those without health insurance. See, e.g., Dept. of Agriculture and Dept. of Health and Human Services, Dietary Guidelines for Americans 1 (2010). The failure of that group to have a healthy diet increases health care costs, to a greater extent than the failure of the uninsured to purchase insurance. See, e.g., Finkelstein, Trogdon, Cohen, & Dietz, Annual Medical Spending Attributable to Obesity: Payer- and Service-Specific Estimates, 28 Health Affairs w822 (2009) (detailing the “undeniable link between rising rates of obesity and rising medical spending,” and estimating that “the annual medical burden of obesity has risen to almost 10 percent of all medical spending and could amount to $147 billion per year in 2008”). Those increased costs are borne in part by other Americans who must pay more, just as the uninsured shift costs to the insured. See Center for Applied Ethics, Voluntary Health Risks: Who Should Pay?, 6 Issues in Ethics 6 (1993) (noting “overwhelming evidence that individuals with unhealthy habits pay only a fraction of the costs associated with their behaviors; most of the expense is borne by the rest of society in the form of higher insurance premiums, government expenditures for health care, and disability benefits”). Congress addressed the insurance problem by ordering everyone to buy insurance. Under the Government’s theory, Congress could address the diet problem by ordering everyone to buy vegetables. See Dietary Guidelines, supra, at 19 (“Improved nutrition, appropriate eating behaviors, and increased physical activity have tremendous potential to . . . reduce health care costs”).

People, for reasons of their own, often fail to do things that would be good for them or good for society. Those failures—joined with the similar failures of others—can readily have a substantial effect on interstate commerce. Under the Government’s logic, that authorizes Congress to use its commerce power to compel citizens to act as the Government would have them act.

That is not the country the Framers of our Constitution envisioned…. Congress already enjoys vast power to regulate much of what we do. Accepting the Government’s theory would give Congress the same license to regulate what we do not do, fundamentally changing the relation between the citizen and the Federal Government.[13]

Indeed. The Court in this regard exercised very sound reasoning. It continued:

The Framers gave Congress the power to regulate commerce, not to compel it, and for over 200 years both our decisions and Congress’s actions have reflected this understanding. There is no reason to depart from that understanding now….

The individual mandate’s regulation of the uninsured as a class is, in fact, particularly divorced from any link to existing commercial activity. The mandate primarily affects healthy, often young adults who are less likely to need significant health care and have other priorities for spending their money. It is precisely because these individuals, as an actuarial class, incur relatively low health care costs that the mandate helps counter the effect of forcing insurance companies to cover others who impose greater costs than their premiums are allowed to reflect. See 42 U. S. C. §18091(2)(I) (recognizing that the mandate would “broaden the health insurance risk pool to include healthy individuals, which will lower health insurance premiums”). If the individual mandate is targeted at a class, it is a class whose commercial inactivity rather than activity is its defining feature.[14]

It is important to emphasize the Court’s explicit recognition of the fact that the purpose of the mandate is to subsidize the costs of insurance premiums for unhealthy individuals by forcing healthy individuals who are on the whole financially better off without it to purchase an insurance policy. The Act does nothing to solve the problem of Americans choosing unhealthy lifestyles; on the contrary, its incentives are perversely contrary to that goal. Rather, it rewards people for doing so while individuals who eat a healthful diet and otherwise make healthy lifestyle choices are penalized by making them pay for the health care costs of their fellow Americans who choose less wisely. This is not to say that choosing a healthy lifestyle can guarantee one will never require health care, and there are certainly times when care is needed for unexpected illnesses or injuries that are no fault of an individual’s lifestyle choices. Nevertheless, the choice of many Americans to live unhealthy lifestyles, as the Court points out, contributes significantly to the problem of the high costs of health care. Despite its name, the Affordable Care Act does nothing to address such underlying causes of unaffordable care. With it, Congress set out from the beginning only to deal with one of the symptoms—namely, high insurance premiums—and did so in a manner that they recognized would only exacerbate the problem, thus making it “necessary” to enact the individual mandate.

The fact that a law may be foolish, however, does not necessarily mean that it is unconstitutional. The Court continued by addressing the government’s argument that it doesn’t matter that the mandate targets inactivity rather than activity on the grounds that:

The Government regards it as sufficient to trigger Congress’s authority that almost all those who are uninsured will, at some unknown point in the future, engage in a health care transaction. Asserting that “[t]here is no temporal limitation in the Commerce Clause,” the Government argues that because “[e]veryone subject to this regulation is in or will be in the health care market,” they can be “regulated in advance.” Tr. of Oral Arg. 109 (Mar. 27, 2012).

The proposition that Congress may dictate the conduct of an individual today because of prophesied future activity finds no support in our precedent. We have said that Congress can anticipate the effects on commerce of an economic activity. See, e.g., Consolidated Edison Co. v. NLRB, 305 U. S. 197 (1938) (regulating the labor practices of utility companies); Heart of Atlanta Motel, Inc. v. United States, 379 U. S. 241 (1964) (prohibiting discrimination by hotel operators); Katzenbach v. McClung, 379 U. S. 294 (1964) (prohibiting discrimination by restaurant owners). But we have never permitted Congress to anticipate that activity itself in order to regulate individuals not currently engaged in commerce. Each one of our cases, including those cited by JUSTICE GINSBURG, post, at 20–21, involved preexisting economic activity. See, e.g., Wickard, 317 U. S., at 127–129 (producing wheat); Raich, supra, at 25 (growing marijuana).

Everyone will likely participate in the markets for food, clothing, transportation, shelter, or energy; that does not authorize Congress to direct them to purchase particular products in those or other markets today. The Commerce Clause is not a general license to regulate an individual from cradle to grave, simply because he will predictably engage in particular transactions.[15]

The Court’s argument here is well reasoned. Its final word on the matter is that:

The individual mandate forces individuals into commerce precisely because they elected to refrain from commercial activity. Such a law cannot be sustained under a clause authorizing Congress to “regulate Commerce.”[16]

IV. Congress Has No Authority to Enact the Mandate under the Necessary and Proper Clause

“The Congress shall have Power … To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers….” — Constitution of the United States, Article I, Section 8

The Supreme Court next turned its attention to the government’s argument that the mandate is constitutional under the Necessary and Proper Clause, an argument which in turn was dependent upon the faulty assumption that Congress has authority to enact it under the Commerce Clause. The Necessary and Proper Clause does not grant Congress an authority additional to the enumerated powers that precede it. If the mandate is not authorized under the preceding Commerce Clause, then neither does the Necessary and Proper Clause separately grant such authority to Congress. As the Court explained:

The Government next contends that Congress has the power under the Necessary and Proper Clause to enact the individual mandate because the mandate is an “integral part of a comprehensive scheme of economic regulation”—the guaranteed-issue and community-rating insurance reforms….

As our jurisprudence under the Necessary and Proper Clause has developed, we have been very deferential to Congress’s determination that a regulation is “necessary.” … But we have also carried out our responsibility to declare unconstitutional those laws that undermine the structure of government established by the Constitution. Such laws, which are not “consist[ent] with the letter and spirit of the constitution,” McCulloch, supra, at 421, are not “proper [means] for carrying into Execution” Congress’s enumerated powers. Rather, they are, “in the words of The Federalist, ‘merely acts of usurpation’ which ‘deserve to be treated as such.’” Printz v. United States, 521 U. S. 898, 924 (1997) (alterations omitted) (quoting The Federalist No. 33, at 204 (A. Hamilton)); see also New York, 505 U. S., at 177; Comstock, supra, at ___ (slip op., at 5) (KENNEDY, J., concurring in judgment) (“It is of fundamental importance to consider whether essential attributes of state sovereignty are compromised by the assertion of federal power under the Necessary and Proper Clause . . .”).

Applying these principles, the individual mandate cannot be sustained under the Necessary and Proper Clause as an essential component of the insurance reforms. Each of our prior cases upholding laws under that Clause involved exercises of authority derivative of, and in service to, a granted power…. The individual mandate, by contrast, vests Congress with the extraordinary ability to create the necessary predicate to the exercise of an enumerated power.

This is in no way an authority that is “narrow in scope,” Comstock, supra, at ___ (slip op., at 20), or “incidental” to the exercise of the commerce power, McCulloch, supra, at 418. Rather, such a conception of the Necessary and Proper Clause would work a substantial expansion of federal authority. No longer would Congress be limited to regulating under the Commerce Clause those who by some preexisting activity bring themselves within the sphere of federal regulation. Instead, Congress could reach beyond the natural limit of its authority and draw within its regulatory scope those who otherwise would be outside of it. Even if the individual mandate is “necessary” to the Act’s insurance reforms, such an expansion of federal power is not a “proper” means for making those reforms effective….

Just as the individual mandate cannot be sustained as a law regulating the substantial effects of the failure to purchase health insurance, neither can it be upheld as a “necessary and proper” component of the insurance re-forms. The commerce power thus does not authorize the mandate.[17]

Here again we may see that the Court’s argument was well reasoned.

V. Congress Has No Authority to Enact the Mandate under Its Power to Collect Taxes (the Court’s Judgment Notwithstanding)

“The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises …; but all Duties, Imposts and Excises shall be uniform throughout the United States” — Constitution of the United States, Article I, Section 8

“[D]irect Taxes shall be apportioned among the several States” — Constitution of the United States, Article I, Section 2

Up until this point, the Supreme Court’s arguments have been logical and consistent with the plain meaning and intent of the Constitution. Clearly, the Court was correct in its judgment that the Congress has no authority under the Commerce Clause or the Necessary and Proper Clause to enact the mandate. It next turned its attention, however, to the government’s argument that it has such authority under the power to collect taxes. We now enter the rabbit hole.

The Government’s tax power argument asks us to view the statute differently than we did in considering its commerce power theory. In making its Commerce Clause argument, the Government defended the mandate as a regulation requiring individuals to purchase health insurance. The Government does not claim that the taxing power allows Congress to issue such a command. Instead, the Government asks us to read the mandate not as ordering individuals to buy insurance, but rather as imposing a tax on those who do not buy that product…. And it is well established that if a statute has two possible meanings, one of which violates the Constitution, courts should adopt the meaning that does not do so.[18]

Of course, if a statute has two possible meanings, both of which violate the Constitution, the courts have a duty to overthrow the law. The Supreme Court, as we shall see, acted in dereliction of its duty by upholding the government’s second interpretation of the statute with absurd reasoning.

The Court acknowledged that

The most straightforward reading of the mandate is that it commands individuals to purchase insurance. After all, it states that individuals “shall” maintain health insurance. 26 U. S. C. §5000A(a). Congress thought it could enact such a command under the Commerce Clause, and the Government primarily defended the law on that basis.[19]

Indeed, this is not only the “most straightforward” reading of the mandate, but the only reasonable interpretation. It is simply not possible to read the mandate as anything other than a command to individuals to purchase insurance. Section 5000A(a) of the Act states:

An applicable individual shall for each month beginning after 2013 ensure that the individual, and any dependent of the individual who is an applicable individual, is covered under minimum essential coverage for such month.[20]

That is clearly not a suggestion; particularly not when coupled with Section 5000A(b), which states:

If an applicable individual fails to meet the requirement of subsection (a) for 1 or more months during any calendar year beginning after 2013, then, except as provided in subsection (d), there is hereby imposed a penalty with respect to the individual in the amount determined under subsection (c).[21]

The Act states clearly that individuals “shall” purchase health insurance, a command explicitly described as a “requirement” for which any failure to comply will incur a “penalty”. That means that under the Act, not purchasing insurance is ipso facto considered unlawful inactivity. Whether the penalty is in the form of a tax or not is irrelevant to the question of whether or not this Act “commands individuals to purchase insurance”, which it plainly and inarguably does.

It should also be noted that the Court in its own language explicitly refers to it as a “mandate”, which is by definition “any mandatory order or requirement under statute, regulation, or by a public agency”.[22] The Court’s suggestion that what is admittedly a “mandate” may not necessarily be a command is patent nonsense, inasmuch as words are intended to actually have meaning. One might just as well argue that the act of acquiring a marriage license does not mean that you are requesting permission from the state to get married. This is plainly ridiculous, inasmuch as a “license” is defined as “governmental permission to perform a particular act (like getting married)…”, and inasmuch as words are actually intended to have meaning.[23] Simply stated, if there is no command, then neither is there a mandate. The converse is also true.

Yet that the admitted “mandate” is not a command is the very argument the Court considered seriously:

But, for the reasons explained above, the Commerce Clause does not give Congress that power. Under our precedent, it is therefore necessary to ask whether the Government’s alternative reading of the statute—that it only imposes a tax on those without insurance—is a reasonable one.[24]

We must recognize that there is no practical difference between saying that the mandate commands individuals to purchase insurance and saying that it merely imposes a tax on those who do not. It’s the same thing. The consequence is the same either way one may choose to look at it. The fact that the “penalty” may be viewed as a “tax” is irrelevant. Whether a “tax” or not, it remains, under the law, a “penalty” incurred for failure to obey the command to purchase insurance, and there is no other possible interpretation that remains practically meaningful. We must also ask whether it is not the ends that are objectionable here and not only the means.

Furthermore, while the Court may have a duty to uphold a law if one possible meaning of it is not found to be unconstitutional, the task of interpreting the law does not extend to ascribing to it a meaning that does not conform with the way it is actually written. That is to say, the Court may have a duty to interpret the law, but it does not have the authority to rewrite it by simply declaring it to mean something other than what it actually says. Yet effectively rewriting the law is precisely what the Court set out to do.

Apart from any alternative reading being plainly nonsensical, we may recall the Court’s own observations that Congress acted intentionally in describing the “shared responsibility payment” as a “penalty”. One may stipulate that the required payment is a “tax”, but this is inconsequential, as it yet it remains, under the law, a “penalty” for failing to comply with the command to purchase insurance. The Court’s implied logic here is that if the mandate is a “tax”, then it is not a “penalty”. This is a non sequitur, for the obvious reason that it can be both. Even if considered a “tax”, it remains a “penalty” under the plain and deliberate language of the law and the recognized intent of the Congress to penalize people who do not purchase insurance.

Additionally, the implied logic of the “alternative reading” of the mandate is that if it is interpreted “only” as a tax on those who do not purchase insurance, then the mandate is not a command to individuals to purchase insurance and the required payment is not a penalty for not doing so. This logic is fallacious because it is begging the question, employing a petition principia fallacy. It is circular reasoning, the premise of its argument consisting of the claim that the conclusion is true. That is to say, the conclusion is that the tax is not a penalty for failure to obey a command, but at the same time the whole premise of the argument assumes that very thing. The logic of the government’s argument is invalid and thus the “alternative reading” is by definition not reasonable. If we employ sound reasoning, we see that it follows that since Congress does not have the authority to command individuals to purchase insurance, therefore it has no authority to penalize individuals for not doing so, whether through taxation or any other means.

The Court continued:

Under the mandate, if an individual does not maintain health insurance, the only consequence is that he must make an additional payment to the IRS when he pays his taxes. See §5000A(b). That, according to the Government, means the mandate can be regarded as establishing a condition—not owning health insurance—that triggers a tax—the required payment to the IRS. Under that theory, the mandate is not a legal command to buy insurance. Rather, it makes going without insurance just another thing the Government taxes, like buying gasoline or earning income. And if the mandate is in effect just a tax hike on certain taxpayers who do not have health insurance, it may be within Congress’s constitutional power to tax.

The question is not whether that is the most natural interpretation of the mandate, but only whether it is a “fairly possible” one. Crowell v. Benson, 285 U. S. 22, 62 (1932). As we have explained, “every reasonable construction must be resorted to, in order to save a statute from unconstitutionality.” Hooper v. California, 155 U. S. 648, 657 (1895). The Government asks us to interpret the mandate as imposing a tax, if it would otherwise violate the Constitution. Granting the Act the full measure of deference owed to federal statutes, it can be so read, for the reasons set forth below.[25]

Notice that the Court argues that “the only consequence” of failure to “maintain health insurance” is that the individual “must make an additional payment to the IRS”. But the fact that this is the “only” consequence is completely irrelevant. It nevertheless admittedly remains a consequence of failing to comply with the command to maintain health insurance. This is, according to the Court’s own logic, unconstitutional. This obviously wouldn’t do, so the Court effectively tried to argue that section 5000A(a) of the Act can be interpreted not as a command, but as merely a suggestion, and that the required payment is merely a “consequence” of a voluntary choice not to heed that non-compulsory “suggestion”. This is plainly ludicrous. How is it “fairly possible” to interpret section 5000A(a) as merely a suggestion, or anything other than a command?

The Court proceeded in its attempt to answer that question:

The exaction the Affordable Care Act imposes on those without health insurance looks like a tax in many respects…. Indeed, the payment is expected to raise about $4 billion per year by 2017.[26]

We may stipulate that payment is a tax, and therefore it is unnecessary to reproduce here the further arguments of the Court in that regard. Skipping further ahead, the Court stated:

It is of course true that the Act describes the payment as a “penalty,” not a “tax.” But while that label is fatal to the application of the Anti-Injunction Act, supra, at 12–13, it does not determine whether the payment may be viewed as an exercise of Congress’s taxing power.

The Court thus began to shift attention away from 5000A(a) to 5000A(b). The purpose for doing so is apparent: the Court had already admitted that the Congress has no authority to command individuals to purchase health insurance. It follows that it therefore had a duty to strike down 5000A(a). But this would have posed a problem for the predetermined conclusion, since this would have made the question of whether the payment required in 5000A(b) is a tax or not effectively moot; if the command to purchase insurance contained in 5000A(a) is unconstitutional, then the “penalty” required in 5000A(b) for not doing so is also ipso facto unconstitutional. Therefore it became necessary for the Court to preposterously assert that 5000A(a) may be interpreted as not a command, thus effectively rewriting the law. From this premise, it set out to also rewrite 5000A(b) by asserting that the “penalty” is not a penalty, even though it is described as such; Congress intended it as such; and it remains such for all practical intents and purposes, whatever other label one may wish to apply to it.

To this end, the Court argued that

the shared responsibility payment may for constitutional purposes be considered a tax, not a penalty: First, for most Americans the amount due will be far less than the price of insurance, and, by statute, it can never be more. It may often be a reasonable financial decision to make the payment rather than purchase insurance….

Second, the individual mandate contains no scienter requirement. Third, the payment is collected solely by the IRS through the normal means of taxation—except that the Service is not allowed to use those means most suggestive of a punitive sanction, such as criminal prosecution. See §5000A(g)(2).[27]

If one breaks down the logic the Court has employed here into its syllogism, we find the following: since the payment may be “considered a tax”, therefore it is “not a penalty”. This is a flagrant non sequitur. As has already been pointed out, it does not follow that since it may be “considered a tax” that therefore it is “not a penalty”, for the simple and obvious reason that it may be a “penalty” in the form of a “tax”. Indeed, it is clearly both. The Court is here engaging in mere casuistry.

This is not to deny Congress’s authority under the Constitution to lay and collect taxes. True, one may just as well argue that laying any tax on the purchase of some good or service constitutes a “penalty” for buying that good or service, even though many such taxes, unlike this one, are not intended to penalize individuals for consumption, but merely to raise revenue. On the other hand, some taxes are intended at least in part to effectively penalize individuals for making certain purchases in order to deter them from doing so (e.g., cigarettes), just as Congress may use tax breaks to incentivize individuals to make other purchases (e.g., housing). The wisdom of imposing such taxes aside, we may stipulate that the Congress does have this authority. However, it does not require any great mental exercise to recognize that there is no slight difference between taxing consumption and taxing non-consumption.

As to the Court’s further arguments here, first, the fact that the payment is likely to be “less than the price of insurance” for most Americans, and thus may be “a reasonable financial decision to make”, is completely irrelevant to the question of whether or not it constitutes a penalty. This logic is equivalent to arguing that spending a night in the local jail is “not a penalty” because it is a less than spending five years in a federal penitentiary; it’s a non sequitur. It does not follow from this observation that the payment is any less compulsory, any less of penalty for not acting as Congress so desires, for the simple and obvious reason that it may also be in the individual’s best interests to do neither. The act of legislating away someone’s liberty, their freedom to choose for themselves, is ipso facto to penalize them. This was precisely the intent of Congress, of course, a fact which the Court attempted to speciously relegate to irrelevancy.

Second, the Court argues that the payment is “not a penalty” because “the individual mandate contains no scienter requirement”. That is to say, individuals need not have knowledge that their failure to purchase insurance is unlawful in order for the “penalty” to be incurred, as may be required for prosecutions under criminal law.[28] In other words, the Court argued that Congress did not explicitly define a failure to purchase insurance as constituting a criminal act, and since it didn’t do so, therefore the payment required for not doing so is “not a penalty”—yet another glaring non sequitur. Knowledge that not buying insurance is an unlawful inactivity is not required for the “shared responsibility payment” to constitute a penalty for that inactivity. Consider: if not buying insurance is not unlawful, logically, then, there can be no penalty—or any legal consequence contrary to the will of the individual, whether described as a “penalty” or not—for not doing so. Conversely, if there is a penalty for not doing so—whether described as such or not—then this inactivity must be considered under the Act to be unlawful. The further corollary, according to the Court’s own argument, is that the mandate must be unconstitutional. Reason demands that we arrive at the opposite conclusion from the one drawn by the Court.

The third argument here is also a non sequitur. The fact that the IRS “is not allowed to use those means most suggestive of a punitive sanction, such as criminal prosecution” does not lead to the conclusion that therefore the required payment is “not a penalty”. While an individual may not be criminally prosecuted, it does not follow that there may not be lesser punitive legal consequences. Indeed, the requirement of the payment itself is ipso facto a lesser punitive legal consequence than criminal prosecution for the act of not purchasing insurance![29] The only way the payment could reasonably be considered, for all intents and purposes, to not be a penalty would be if compliance was completely voluntary. Unless the Court is telling the American people that they are simply free to ignore the mandate altogether (which would mean it wasn’t a mandate) and neither purchase insurance nor make the “shared responsibility payment” to the IRS, that there will be no legal consequences for doing so and no enforcement of the “requirement” to pay the tax (which would mean it wasn’t a requirement), and that any such choice will not be considered unlawful, then the logic employed here is patently fallacious.

Again, this is not to say that every tax mandated by Congress must therefore be considered a “penalty” for making a purchase. We return to the distinction between taxing consumption and taxing non-consumption. Consider that if a “penalty” tax is laid on cigarettes, individuals remain free to purchase cigarettes or not, and neither choice is considered by the government to be an unlawful act invoking punitive legal consequences. Yet in this case, the Court, as we shall see, has in fact determined that failure to make the “shared responsibility payment” would indeed be considered by the government to be unlawful. Note that the Congress could use its power to offer tax breaks to individuals who do purchase insurance, if it wished to incentivize such activity in the market without infringing on personal liberty (setting aside the question of the wisdom of interfering in the market by such means, as the government did in housing, thus contributing to the housing bubble[30]).

This is actually a point the Court makes implicitly in its next argument:

None of this is to say that the payment is not intended to affect individual conduct. Although the payment will raise considerable revenue, it is plainly designed to expand health insurance coverage. But taxes that seek to influence conduct are nothing new…. Today, federal and state taxes can compose more than half the retail price of cigarettes, not just to raise more money, but to encourage people to quit smoking. And we have upheld such obviously regulatory measures as taxes on selling marijuana and sawed-off shotguns…. That §5000A seeks to shape decisions about whether to buy health insurance does not mean that it cannot be a valid exercise of the taxing power.[31]

The observation that “taxes that seek to influence conduct are nothing new” is an irrelevant strawman argument. It remains true that Congress attempting to lay a tax on individuals precisely for not making a purchase is indeed something new. It is, in fact, an unprecedented claim to power by the Congress. This is evident in the fact that it was necessary for this case to be heard by the Supreme Court to address that question in the first place, and in the fact that the Court cited no precedent for such a tax in its entire judgment. As the New York Times observed following the Court’s decision, this is a “tax” that “does break new ground. ‘Nobody here can think of an example where you pay a tax if you do not buy something,’ said Howard Gleckman, a resident fellow at the Tax Policy Center in Washington.”[32]

Likewise, it is true that the fact that section 5000A “seeks to shape decisions about whether to buy health insurance” does not by itself mean “that it cannot be a valid exercise of the taxing power”. But this is a similarly irrelevant observation, since the whole question before the Court is regarding the means by which Congress intends to “shape decisions”; it may, after all seek to “shape decisions” by either constitutional or unconstitutional means. The Court effectively continued to evade this central question with such irrelevant observations, which do nothing to further its argument; to wit, it does not follow that since the Congress has authority to use its tax power to influence conduct, and has historically done so, therefore it may tax people for not making purchases it would have them make.

The Court next tried to draw the conclusion that the “shared responsibility payment” is “not a penalty” because it is not punishment for an unlawful act by the following means:

In distinguishing penalties from taxes, this Court has explained that “if the concept of penalty means anything, it means punishment for an unlawful act or omission.” United States v. Reorganized CF&I Fabricators of Utah, Inc., 518 U. S. 213, 224 (1996); see also United States v. La Franca, 282 U. S. 568, 572 (1931) (“[A] penalty, as the word is here used, is an exaction imposed by statute as punishment for an unlawful act”). While the individual mandate clearly aims to induce the purchase of health insurance, it need not be read to declare that failing to do so is unlawful. Neither the Act nor any other law attaches negative legal consequences to not buying health insurance, beyond requiring a payment to the IRS. The Government agrees with that reading, confirming that if someone chooses to pay rather than obtain health insurance, they have fully complied with the law. Brief for United States 60–61; Tr. of Oral Arg. 49–50 (Mar. 26, 2012).

Indeed, it is estimated that four million people each year will choose to pay the IRS rather than buy insurance. See Congressional Budget Office, supra, at 71. We would expect Congress to be troubled by that prospect if such conduct were unlawful. That Congress apparently regards such extensive failure to comply with the mandate as tolerable suggests that Congress did not think it was creating four million outlaws. It suggests instead that the shared responsibility payment merely imposes a tax citizens may lawfully choose to pay in lieu of buying health insurance.[33]

We must again pause to examine the Court’s ridiculous logic, as the fallacies here are numerous. First, there is a glaring self-contradiction fatal to the Court’s conclusion. Observe that the Court states that the Act does not attach “any negative legal consequences to not buying health insurance, beyond requiring a payment to the IRS” (emphasis added). The Court thus implicitly acknowledges that the required payment to th

  • Ralph T. Howarth, Jr.

    Very thorough article. Thank you.

    There is one glossed over defect not brought up in this article concerning the Tax and Spend clause. The Tax and Spend clause is misrepresented at large, and in this article here, as an enumerated power. It is instead an ancilary plenary power that gives affect to the enumerated powers. The enumerated powers would be nothing without the power of the purse. It is frivilous for any law other than an bill to raise revenue to cite the Tax and Spend clause as a grant of power for justification for that law because that power is non-specific of any purpose and is only a preface to the actual enumerated powers of the federal government. The Tax and Spend power is then sub-joined to all other objects of power with a stipulation that the taxing and spending must affect the common defense and the general welfare of the states. This means that the objects of taxing and spending must be for the whole country, and not just one segment of it, and only under the enumerated powers that have been nationalized by the federal constitution. Simply put, if a law is not germane to an enumerated power, then it cannot be a federal power; tax and spending power notwithstanding as states also have a tax and spending power to objects not under the purview of the federal seat.

    See also:

    • Jeremy R. Hammond

      Thanks for that view, Ralph.