Bumped up from October, 2010.

In light of the current arguments before the Court, I’m bumping this refresher on the relevance of the tax angle. This was posted over a year ago as the challenge to Obamacare passed a major hurdle on its way to today’s hearings with SCoTUS. Some of the nuances being discussed, such as the distinction between a “tax” and a “penalty” and a “mandate”, may seem like details to the layman, since they all compel you to pay. But under the Constitution, the government’s powers are limited, at least in theory. Thus these distinctions are important.

A post by Maynard

Perhaps you saw this Drudge-linked article:

U.S. District Judge Roger Vinson allowed two major counts to proceed: the states’ challenge to the controversial requirement that nearly all Americans buy insurance and a required expansion of the Medicaid program.

In his ruling, Vinson criticized Democrats for seeking to have it both ways when it comes to defending the mandate to buy insurance. During the legislative debate, Republicans chastised the proposal as a new tax on the middle class. Obama defended the payment as a penalty and not a tax, but the Justice Department has argued that legally, it’s a tax.

“Congress should not be permitted to secure and cast politically difficult votes on controversial legislation by deliberately calling something one thing, after which the defenders of that legislation take an “Alice-in-Wonderland” tack and argue in court that Congress really meant something else entirely, thereby circumventing the safeguard that exists to keep their broad power in check,” he wrote.

The question here is whether the insurance mandate, which is at the heart of Obamacare, is in fact a tax. This is a crucial point. Until and unless martial law is declared, the Federal government must justify its laws under the powers granted it by the Constitution. There’s no way the government can justify compelling an individual citizen to purchase a particular product. Such a mandate would be illegal and unprecedented. This is not analogous to, for example, requiring insurance on a car, since your decision to acquire a car was voluntary. You chose to engage in an act of commerce, and thus subjected yourself to a regulated transaction or environment. On the other hand, the insurance mandate is a regulation on your very existence. You see the problem? If this stands, then by the same logic the government can likewise regulate your diet. After all, if you’re not eating right, you’re exceeding your health care footprint. Next thing you know, the government will require you to purchase (and consume) a box of shredded wheat every week.

So the government can’t, under the law, make you buy a thing. But, as we know all too well, the government has the power to tax. Therefore, the legal defense of Obamacare must necessarily be that the mandate is merely another tax. It must be a new and pretty weird tax, in that it’s paid to a third party. But it’s a tax. That’s the argument the Justice Department attempted to make.

The problem here is that we and Congress were told, endlessly and ad nauseam prior to Obamacare being passed, that the health care mandate was not a tax. Do you remember? This CNN report from last year is typical of what we heard:

In a testy exchange on ABC’s “This Week,” broadcast Sunday, Obama rejected the assertion that forcing people to obtain coverage would violate his campaign pledge against raising taxes on middle-class Americans.

“For us to say you have to take responsibility to get health insurance is absolutely not a tax increase,” Obama said in response to persistent questioning, later adding: “Nobody considers that a tax increase.”

Asked again about critics calling the requirement to pay for health insurance a tax increase, Obama said: “My critics say everything is a tax increase.”

Yesterday they swore the bill wasn’t a tax. Today they swear it is. So this bill was deliberated and passed because lies prevailed over truth. And now Obama and his lackeys want to shrug off yesterday’s deception while holding onto to their ill-gotten gains. But finally a judge has indicated there’s a limit to government duplicity.

If the foregoing doesn’t sound like a big deal, it’s because we’ve become so acclimated to lying politicians and lunatic government that we no longer expect Washington to meet even the most minimal standards of decency or veracity or sanity.

Back to the original news report…

[Judge] Vinson ruled that [the insurance mandate is] a penalty, not a tax, and must be defended under the Commerce Clause and not Congress’s taxing authority.

So it seems the judge incorporated a principle of “truth in advertising” in his ruling. Since the mandate was explicitly sold as a non-tax, and it was understood by the legislators that passed it that is was, in their professional opinions, not a tax (or so they told us), it must be subsequently defended as a non-tax. The case will presumably end up in the Supreme Court, unless Obamacare is repealed before it gets there.

If the mandate were to be upheld by the Supreme Court under the Commerce Clause, then that would be another nail — perhaps the final nail — in the coffin of the notion of a government with any limits to its power over the people. Let’s hope it doesn’t come to that.

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11 Comments | Leave a comment
  1. Pangborn says:

    It just proves that no matter how much lipstick you put on a big steaming pile it’s still a big, steaming, elitist, unconstitutional, over-reaching pile of nanny state Demoscat.

  2. thierry says:

    and now with their lies catching up to them, the administration is exempting others besides themselves from the provisions of obamacare-big corporations (Mcdonalds)( aren’t they evil because they are a big successful company and sell poison to fat kids? aren’t they the primary reason we need obamacare in the first place? why exempt Satan?), some religions but not others (Muslims but not the Amish both of whom have the exact same reason to be opposed to the law) – all of which flies in the face of equal protection under the law, the 14th amendment.

    In MA the fine for not buying romneycare is called a ‘penalty’ but is incorporated in the MA income tax paperwork wherein you have to prove you have the health insurance or an exemption .and they will confiscate your refund or withhold it if you appeal their decision to fine you.

    in MA and under ElderMittenzCare to avoid having the law instantly dragged through court by certain religious groups with the clout and money to do it( the christian scientists are based in boston) ,they at least inserted a sweeping ,nonspecific exemption for those with religious based beliefs the law violated. obamacare rather is based on exempting Themselves and certain political pets from certain provisions and cutting sweetheart deals with certain professional groups like the AMA and the drug lobby some of whom will be getting bit in the ass soon now that we can finally see what is in the law.

    the law is everything we said it was doing everything we said it would do- and did first in MA. i am still a little in awe that finally an actual resident- a poor one- is suing the state over Mittenzcare, on the books since 2006. i think in one of the recent cases a judge opined it was up to the citizens not the states to sue over federally enforced product purchasing under threat of penalty- which overlooks the fact that those who cannot afford the high priced insurance and therefore the fines/’taxes’ do not have the resources to sue the federal or state government nor the political power to get themselves exempted. that doesn’t sound like equal protection .


    how i pretty much judge any politician now is where were they when obamacare was being rammed through the congress or when mittenz romney was signing mittenzcare into law?

  3. makeshifty says:

    Regardless of what this judge thinks, I’m dubious that the Supreme Court will apply the same standard. It would be refreshing if it did, because it would keep politicians more honest with the public. I think the SC is much more concerned with what the law says, the philosophy of the law, and/or the circumstances around the case, than how it was sold.

    Secondly, there was a change in the bill before it was passed. One of the versions had a penalty in it. The White House insisted it be changed to a tax in the final version, because they figured a penalty would run into constitutional problems.

    The way it’s written in the bill is if you do not have approved health insurance, it shoves you into a higher tax bracket. It does not charge a flat fee regardless of your income. So in effect the government will argue that it’s not really forcing you to buy insurance. It just categorizes you as a different kind of income earner who’s taxed at a different rate than those who have approved insurance. The implication, though, is difficult to miss. Even though your income hasn’t changed at all, you are taxed differently based on whether you own something or not. That, I think, is something the SC could chew on. Though I imagine the government will argue that if someone has very low income, or no income at all, regardless of if they have insurance or not, they will not be charged the tax, since there’s little or no income to consider. Really, there are all sorts of ways the government could jimmy this, and I hope the plaintiffs bring this up, because it’s something the SC should consider. For example, the government could decide that if you’re below the poverty line you won’t be shoved into a higher bracket. You’re categorized as being too poor for private insurance, and should not be expected to buy it. It seems to me the SC could have a field day with this:

    “So what you’re saying is the reason for the tax is you expect people in certain income brackets to have insurance. It seems to me you are taxing on the basis of personal characteristics that have little to do with income. Isn’t this a problem with regard to the 16th Amendment? Is not the purpose of taxation to fund the administration of our laws, and to fund the defense of this country, and not to coerce people to do certain things; in this case, to own something? Under your reasoning, even if this law didn’t exist, it seems to me you could require people to certify their weight, or certify that they don’t smoke, or certify that they have one car instead of two or more, or that they have zero or just one child, instead of two or more, and tax them at different rates depending on these criteria. Even though I imagine this wouldn’t happen in this country, couldn’t this have more sinister implications? Just considering the logic alone, couldn’t the government tax you at a different rate if you are an atheist vs. if you are Christian or Jewish, or some other religion? It’s a matter of choice, is it not? The government could argue the same thing: ‘We’re not forcing anyone to change their religion. We’re just taxing them differently.’ Isn’t that right?” In other words, this is not just about the government’s ability to tax income. This has implications for people’s rights.

    I imagine the government would argue that we already categorize people in ways that have nothing to do with income. We give tax breaks for tuition costs for students who go to college. We give tax breaks for people who have health insurance or certain medical expenses. The court could argue, however, that those are credits–fees in reverse. They don’t directly alter the tax bracket you go into.

    What I think this case in the SC should hinge on is the fact that in the past income tax rates have always been tied to “a kind of income”, and this is more compatible with the language of the 16th Amendment. It specifically talks about taxing income that is derived from a source, not personal characteristics. If you get income from investments it’s taxed at a different rate than income from employment. If you get income as a farmer, or a church worker, the rate at which income is taxed may be altered. People’s characteristics have been used to determine credits, but never before have they been considered as a criteria for altering their tax rate. In effect the court case could be about a philosophical argument on, “What is the purpose of taxation, and what is the income tax law really about?” I think there’s a chance that the states could win on this argument.

    • Maynard says:

      Interesting rundown on how the arguments might go. The depressing thing is, in reading the justifications, it’s so easy to lose sight of the big picture. Inch by inch, step by step, we rationalize the minimization of the individual and the maximization of the state. It’s the boiled lobster syndrome. And every little step sounds so reasonable.

      With respect to your first point…I understand that SCOTUS won’t rule against a law simply because its proponents lied to the people. But perhaps that’s not the right way to look at it. The last time I checked, I don’t hear the prevailing politicians announcing, “Yep, we lied.” And unless that happens (and obviously it won’t), any legal analysis will, in attempting to interpret the law, be guided by the expressed sentiments of whoever wrote the law. I mean, they should know what they were trying to do, right? They’re the authorities on the matter. And they clearly told us the law was not a tax. Seems to me that carries far too much weight to be dismissed in favor of a contrary self-serving interpretation put forth by a third party after the fact. I figured that was what Judge Vinson was thinking. But I’m no lawyer.

      • Shifra says:

        I’m no lawyer, either, (but I *did* stay at a Holiday Inn once 🙂 ) but Maynard’s post should be *required* reading for every Dem/Lib/Lefty/KoolAid-drinkingObot

  4. Chris says:

    The fact that Congress would force you into a contract with another private party– insurance companies is clearly not constitutional, either. And, the argument of the car insurance, that’s the STATE requiring it, not the Fed.

  5. Sue Lynn says:

    Thank-you Tammy Bruce great post!!!! I stand with Sarah Palin Tammy Bruce…..

  6. LucyLadley says:

    Maynard, we TAMS so appreciate your posts. Your approach is always so logical & well put. Many Thanks!

  7. makeshifty says:

    Since you’ve bumped it up, I figure I’ll comment again. The government’s argument was depressing: By virtue of being born, you are in the market, and you are engaged in commerce, or at least will be. So that gives us the right to regulate your commercial activity. No longer is commerce defined by what you do, but by what the government anticipates you will do. I thought the conservatives brought up the point well that this would apply to mortuaries (we’re all going to die). One day it will likely apply to computing devices (like smartphones). One day they will become so essential to life in society that you will eventually buy one. So by this logic, the government can regulate your activity in those markets in advance. It’s a way to try to set up a fascist state, government working hand-in-glove with business.

    I don’t remember the details of this exactly, but I am reminded that when Bobby Kennedy was Attorney General, he confronted a sheriff who arrested people who I think were protesters/civil rights activists (not sure). Kennedy asked the sheriff pointedly why he arrested them. The sheriff said they were planning something (I think). Kennedy pressed further, “But they didn’t do it.” The sheriff blurted out, “But they were *going* to do it.” Kennedy and the rest of the room erupted in laughter, mocking the sheriff. Kennedy said, “Will somebody get this man a copy of the Constitution?” I wish one of the justices had the cojones to say that to the government’s lawyers.

    The other thing that offended me was the government’s lawyers said this had to do with regulating how health care is “financed”. Well, insurance is not about financing anything, and I think this was a “tell” on how the government really views this whole issue. “Comprehensive health insurance” is not about insurance. Right now it’s a private social medical financing system. Insurance is about mitigating risks. My auto insurance does not finance the costs associated with my driving. It doesn’t pay for maintenance or my gas. It’s there in case I get into an accident, which is expected to be a rare occurrence. You don’t “finance” rare occurrences.

    The same “in commerce in advance” argument was approved by federal judges in some of these cases on the ACA that occurred last year. They gave the same rationale in their decisions. In a decision in Michigan, the majority opinion talked about how this view was needed because patients who can’t pay and aren’t insured place a huge burden on interstate commerce in health care, and the institutions that provide care can’t survive without the individual mandate to finance it. So therefor this view is justified. I saw it as an “institutional support” argument. In order for them to survive, everyone must chip in and finance them. I thought of a scenario that I did not hear brought up in the SC hearing on this: What if at some point in the future the cost of “going off the grid” came down so much that the rich and middle class could afford to generate their own electricity, leaving only the poor to depend on central utilities? The burden might be so great that some of the utilities would threaten to shut down, because they didn’t have enough paying customers to justify their existence. Perhaps there would still be enough people, though, who needed all of those power plants operating. Further, because so many people went off grid, entire sections of the grid were lying fallow, unmaintained or torn down. Then some disruption happens in the world market, and the material needed to make the machines that generate power for people becomes scarce. Suddenly millions of people want to get back on the grid. Governments and utilities decide jointly that these people can’t go without power, so they decide to finance building out the grid again, and they want more people to buy utility power, and pay energy taxes to finance it. Should we force those people who choose to remain “off the grid” to go back on the grid, and pay for it to support the utilities, because as disruptions in this critical market occur, more people will inevitably need to get back on the grid? Aren’t those who are “off grid” now “already in commerce?” They are substantially affecting interstate commerce by first buying the equipment to generate their own power, and refusing to buy utility electricity. The government could regulate that by similar logic to what the government is using now, right? It’s just so convenient. We need you to finance what we want to do, so we’ll urge you to finance it by buying a service in the private sector, because (wink, wink) “they’re working with us.” If you don’t, you’ll have to chip in some tax money. This is what we’ve got going on. I hope the SC sees that.

    I’m glad this was brought up during the hearing, but it wasn’t emphasized enough. Yes, there is a problem of too many freeloaders, but the answer to that is not to come in after the fact and finance the freeloaders and act like, “We have to do it,” as if it’s a foregone conclusion that’s as natural as, “I stubbed my toe, so therefor it hurts.” No it isn’t. Society has made a *choice* to finance freeloaders on the medical system. Since it was a choice it made, it can change or unmake it, which was what Scalia said. I am so thankful he did. It is not a condition where we have no choice but to make everyone buy government-approved insurance. If people are unwilling or unable to plan responsibly for their own medical needs, they will need to depend on the charity of others. That is not as bad as it may sound. The problem we have now is freeloading is financed regardless of how the freeloaders use the medical system. If charity was the norm, that charity could be conditional to prevent the medical system from being overused and abused.

    The ACA misses the point on medical costs. It focuses only on insurance instead of where the costs really are, which is in the delivery of care, and puts an unnecessary burden on society. It should go.

  8. ReardenSteel says:

    Great point Shifty, “too poor to buy private insurance”, sounds like the gateway to single payer to me. Which, in my opinion, is what this entire end run around the Constitution has been all about. This is what “total transformation” means. What did Mooch say in ’08? “We must change our conversation, our history, our traditions.” What better way to do that than to than to flip the gov’t/ citizen relationship on its head for good?

    Maynard, great post dude! I appreciate the smart, solid arguments you put forth here. Don’t always agree, but you always make me think and rethink things. Thanks.

    Friends, if anyone tells you that this bunch of traitors just want what’s best. They just want to make America a better country. I implore you to respond quietly and calmly with one word and one word only. Bullshit. If they persist, respond again with one word. Liar. For they are attempting, by proxy, to help this bunch get away with treason. They have been waging war on the American people since day one. If “We the People” stay asleep and let it happen to this great country, we shall deserve the tyranny we get.

    Call me extreme or hardline, but this bunch should be tried for treason. The lot of them.

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