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The individual mandate is to be administered through the tax code: On their forms, taxpayers will have to submit evidence of adequate insurance or, unless they qualify for a hardship exemption, pay a penalty.
Yale Law School professor Jack Balkin likens this to Congress raising money for environmental programs by taxing polluters. “Congress is entitled to raise revenues from persons whose actions specifically contribute to a social problem that Congress seeks to remedy through new government programs,” he concludes.
Just because the IRS will police the mandate does not make this an issue of taxation. As written, the bill would impose a fine for not having insurance. How’s that a tax? In fact, President Obama insisted to ABC’s George Stephanopoulos that a fine for flouting the mandate is not a tax. “No, but—but, George, you—you can’t just make up that language and decide that that’s called a tax increase,” Obama said. Guys, let’s get our stories straight.
Missing the Mark
Balkin’s example misses the mark. Since a polluter aggresses against innocents, a “tax” on him could be construed as restitution (if the money went to those damaged). There’s no analogy with a fine for not having insurance. Obama would say the uninsured cost the rest of us money, but that’s certainly not true of anyone who pays for medical care out of savings. Besides, the uninsured get an unfair rap. It is the insured, not the uninsured, who bid up the real price of medical services: Under the current interventionist system those services appear cheap and even free to those with insurance. The uninsured are the victims not the perpetrators.
I realize that these arguments are futile. As Balkin points out, the Supreme Court has long held that the government may use the tax system to regulate conduct—even if regulation, and not revenue, is the primary motive. As the Court said in U.S. v. Sanchez (1950), citing precedents from the 1930s:
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. . . . The principle applies even though the revenue obtained is obviously negligible . . . or the revenue purpose of the tax may be secondary. . . . Nor does a tax statute necessarily fall because it touches on activities which Congress might not otherwise regulate. [Emphasis added.]
Let that last phrase sink in. To amplify it the Court quoted an earlier case, Magnano Co. v. Hamilton (1934):
From the beginning of our government, the courts have sustained taxes although imposed with the collateral intent of effecting ulterior ends which, considered apart, were beyond the constitutional power of the lawmakers to realize by legislation directly addressed to their accomplishment. [Emphasis added.]
Congress may do via the taxing power even things it may not do directly.
Don’t Blame the New Deal
It may be tempting to blame this all on the New Deal courts. But that temptation should fade as one reads the warnings issued by the Antifederalists while the ink was still wet on the constitutional parchment. As one Antifederalist said, “By virtue of their power of taxation, Congress may command the whole, or any part of the property of the people.” And another: “[T]his power therefore is neither more nor less, than a power to lay and collect taxes, imposts, and excises at their pleasure; not only [is] the power to lay taxes unlimited, as to the amount they may require, but it is perfect and absolute to raise them in any mode they please.”
Too bad they weren’t listened to.
Sheldon Richman is editor of The Freeman, where this article originally appeared.